The integrity of an official housing affordability measure has been questioned after it used an interest rate unavailable to many first home buyers.

The Ministry of Business Innovation and Employment (Mbie) is standing by the work, which is the first official measure of housing affordability.

Two days before Mbie released the new measure in May, the Reserve Bank advised the effective mortgage rate measure it used would soon be discontinued and "probably wasn't the best measure to be using anyway", documents released to Radio New Zealand show.

The new customer mortgage rate was more relevant for assessing housing affordability, the Reserve Bank advised. It sits about 1 per cent higher than the effective mortgage rate.

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Labour's housing spokesman Phil Twyford. Photograph / George Novak
Labour's housing spokesman Phil Twyford. Photograph / George Novak

Labour's housing spokesman Phil Twyford said the Housing Affordability Measure (HAM) was flawed and officials knew that when they released it.

"A measure of home affordability that assumes home buyers get a 100 per cent, 30-year mortgage at a rate well below what any first home buyer can get is completely out of touch with reality," Twyford said.

"Nick Smith needs to urgently re-issue HAM with accurate numbers on the true state of housing affordability."

An Mbie spokesman told the Herald that criticism was incorrect.

"It is true the RBNZ disagreed with the statistical series used, but that doesn't make it incorrect. Our analysts stand by the integrity of their work."

Analysts had chosen the interest rate used in HAM because it covered a longer time period. Given that the interest rate measure was discontinued in January, another series would replace it "in due course", the spokesman said.

"Once there is a review of choice of interest rates, Mbie will work with RBNZ to find a suitable replacement.

"The HAM is an experimental statistical series. As such it is undergoing a period of user testing for purposes of public discussion and commentary. As was stated at the time of release...feedback will be sought, and where appropriate, used to revise and improve the product."

The housing affordability measure was released five years after it was commissioned, partly because of officials' concerns about its political sensitivity.

Its findings are stark: four out of five renters in New Zealand cannot not buy a house in their area without going into financial hardship.

The picture is bleaker in Auckland, where unaffordability levels are at 86 per cent, and as high as 96 per cent in the southern suburbs.