The average prices being paid by first home buyers have declined slightly over winter
By Greg Ninness
More first home buyers are taking out higher risk, low deposit mortgages, although that doesn’t appear to be affecting the average price they are paying for a home of their own, or the average amount they are borrowing, which are both relatively flat.
The latest mortgage lending figures from the Reserve Bank show that total lending to first home buyers (FHBs) was flat over winter, with 2445 mortgages approved to FHBs in June, another 2201 in July and 2481 in August.
However FHBs taking out the higher risk, low equity mortgages (where they have less than a 20% deposit), has steadily increased for five consecutive months, rising from 27.4% of mortgages approved to FHBs in March to 32.4% in August, almost certainly as a result of the Reserve Bank easing lending restrictions on low equity lending by the banks (see the first graph below).
But so far, that does not appear to have pushed up the prices FHBs are paying for their homes and consequently, the average amounts they are borrowing.
In fact the reverse appears to be the case, with interest.co.nz estimating that the average price paid by first home buyers declined from $682,000 in June this year to $661,000 in August, which was its lowest point since February this year and still well below the peak of $718,000 in December 2021.
Similar trends are evident in the average estimated prices being paid by both low equity borrowers and those with a 20% deposit, and in the average amounts they are borrowing.
The second graph below shows the estimated average prices paid by first home buyers each month since January 2019, according to whether or not they had a minimum 20% deposit.
Just under three quarters of the low equity loans approved in August were to first home buyers.
What these latest figures suggest is that the recent loosening of LVR mortgage lending restrictions by the Reserve Bank has probably increased the number of homes being purchased by first home buyers, but does not appear to have increased the prices they are paying for them.
This story was originally published on Interest.co.nz and has been republished here with permission.