The average amount first home buyers are paying for a home is estimated to have increased by $118,000 in the year to July

By Greg Ninness

The number of first home buyers purchasing their own homes remains at elevated levels but unfortunately both the prices they are paying for those homes, and the amount of debt they are taking on, is at record levels.

According to the Reserve Bank, 2925 first home buyers had mortgages approved in July this year. Interest.co.nz estimates they accounted for 40.7% of property sales during the month.

Both the number of mortgages approved and the share of total sales to first home buyers have declined slightly for two consecutive months, however they remain near the upper end of where they been over the last few years.

Although first home buyers may have been slightly less active in the market over the last couple of months, the amount they are paying to get into their own homes and the amount of debt they are taking on to achieve that are both at record levels.

Interest.co.nz estimates the average price paid by first home buyers in July was $685,897, which was up by $118,329 (+21%) compared to July last year.

Over the same 12 month period the average size of first home buyers' mortgages has increased by nearly $95,000, rising from $454,054 in July last year to $548,718 in July this year.

Those are national figures, so first home buyers are almost certainly borrowing significantly more in places like Auckland, the Bay of Plenty and Wellington where house prices are considerably higher than the national average.

And many are stretching themselves financially in the process.

The Reserve Bank figures show more than a third (35.1%) of the mortgages approved for first home buyers in July had loan-to-valuation ratios above 80%, and that percentage has been increasing for four consecutive months.

That suggests many recent first home buyers could be among those hardest hit when the much anticipated increases in mortgage interest rates finally start to arrive.

This story was originally published on Interest.co.nz and has been republished here with permission.