First-home buyers will be squeezed hardest if the Reserve Bank tightens mortgage lending rules from October 1, one expert says.
Kelvin Davidson, the chief property economist at CoreLogic, said new measures by the Reserve Bank to tighten loan-to-value ratios and bring in debt-to-income ratios could see some Auckland first-home buyers needing an extra $90,000 to secure a mortgage.
Wellington first-home buyers could need an extra $81,000 each and Christchurch first-home buyers could need an extra $50,000, he calculated.
The Reserve Bank has been consulting on reducing the share of owner-occupiers wanting to borrow more than 80 per cent of their purchase price from 20 per cent to 10 per cent of all bank lending.
Those are the people who can now borrow, even though they have less than 20 per cent deposit, loading up the most with debt compared with their incomes.
"They've been the ones taking the most advantage of the current rules," Davidson said.
Auckland's average first-home buyer might need to find an extra $90,000 to get their deposit up to any new required level which could be announced from October 1, he estimated.
The Reserve Bank has not yet announced what it will do but said on August 3 that it would consult on ways to tighten mortgage lending standards.
Geoff Bascand, the deputy governor, said of banks' riskiest lending: "In order to prevent this problem from getting worse, we will be consulting on a proposal to further reduce the amount of high LVR lending to owner-occupiers.
"We propose to restrict the amount of lending banks can do above an LVR of 80 per cent to 10 per cent of all new loans, down from 20 per cent at present. We will begin consulting on this change later this month with a view to introducing it from October 1."
Davidson said that move could put a renewed focus on first-home buyer new-builds because these properties were exempt from the deposit rules.
"Amidst the broader surge in property values over the past year or so, first-home buyers have obviously found themselves also having to pay significantly higher prices to get their foot on the ladder.
"For example, in June first-home buyers paid a median price of $685,275 across New Zealand as a whole, about $150,000 more than the figure of $535,000 in June last year.
"Of course, this trend of rising first-home buyer prices paid has been in play for a while now, but has accelerated markedly post-Covid," Davidson said.
As prices rise, buyers face ever-increasing deposit hurdles.
More than three-quarters of all owner-occupier lending done outside the 20 per cent deposit speed limit went to first-home buyers in June, a figure that has steadily risen, Davidson said.
"Put another way, 38 per cent of all FHB lending in June was done with less than a 20 per cent deposit. This exemption or speed limit has been a key support for FHB demand in the property market," he said.
The Reserve Bank is consulting on the change for a start date of October 1 but of course the banks themselves could move earlier than that, Davidson said.