The Surge of First Time Buyers – Is Now the Right Time for You?
First home buyers have seen an incredible resurgence in the market since lockdown restrictions lifted, taking full advantage of the record low-interest rates, loosening of LVR’s and steady house prices, with more incentives being announced by the government to entice more first time buyers into the market, is this the right time to buy?
The Trend
According to the latest Reserve Bank mortgage lending by borrower type figures, the FHBs accounted for $1.09 billion of mortgages in June, which made up 20.3% of the $5.364 billion total advanced during the month. The RBNZ said that was the highest percentage recorded by the FHBs since it had started collating the information in 2013. Compared with the same month in 2019 the FHB borrowing was up 17.7% from $926 million.
Additionally, the FHBs actually out-borrowed the investors in June, which is only the second time that’s happened (the first time in May last year) since the RBNZ started publicly releasing the data in August 2014. The $1.04 billion borrowed by the investor group in June represented 19.4% of the total advanced, which was the lowest share of mortgage money taken by the investors since August last year, which may come as a surprise to many, as the previous requirement for them to find 30% deposits has now gone, lifted by the RBNZ when it removed the limits on high loan to value ratio (LVR) lending.
In terms of the total amount of money borrowed in total during June, this represented a continued bounce-back of the housing market after the April lockdown month with a total of $5.364 billion borrowed. This was up 24.2% on the $4.318 billion borrowed in May, while the May total was up some 57.1% on the $2.749 billion borrowed in April.
First Time Mortgage Payments the most Affordable They’ve Been in Nearly Four Years
According to a recent Home Loan Affordability Report, the rapid decline in mortgage interest rates since the COVID-19 crisis started to bite has made the mortgage payments on a starter home the most affordable they have been in nearly four years.
The average of the two-year fixed mortgage rates offered by the major banks was 3.52% in February before severe lockdown restrictions were put in place and had fallen to 2.76% in June. Over the same period the Real Estate Institute of New Zealand’s national lower quartile selling price moved marginally, from $458,500 in February to $452,000 in June, after briefly peaking at $480,000 in March.
In Auckland, the most expensive region in the country where the lower quartile price was $726,000 in June, falling interest rates saw the mortgage payments on a lower quartile-priced home drop from $581.06 a week in February to $547.57 a week in June, a saving of $33.49 week, while the ratio of mortgage payments to net pay dropped from 33.8% to 31.6% over the same period.
Incentives
The Government on Friday took its first step towards helping more New Zealanders into their first homes via progressive homeownership, by giving two community organisations a total of $23 million to scale up their existing offerings. The Housing Foundation in Auckland received $17 million to deliver 78 homes mainly through its Shared Home Ownership Programme, and also its Rent to Own offering.
Greens co-leader Marama Davidson stated that it was a huge step forward to get more kiwis into their first home, “This fund means more low-income families who have been locked out of the housing market will finally have a chance at owning their own home.”
To qualify applicants must be older than 18, must be a first-home buyer or ‘second chancer’, must be citizens, permanent residents, or resident visa holders, have a household income below $130,000 and be able to secure a commercial mortgage and have some money for a deposit.
Housing Minister Megan Woods also commented on a proposed “rent to buy” scheme, stating that work was underway to establish an initiative within Kāinga Ora for households with an annual income of under $130,000 to receive shared ownership support directly from the Government and is expected to be available in early 2021.