Housing affordability worsens

Higher house prices have made homes less affordable, says the latest home loan affordability survey. Photo / Mark Mitchell

Home loan affordability worsened across most of New Zealand last month as house prices continued rising, despite the introduction of the Reserve Bank's lending restrictions.

Surveys show a significant slowing of low deposit lending and first home buyer activity since the restrictions began on October 1, but that has yet to flow into a slowdown in house price inflation.

Median house prices rose in 19 of 24 regions and hit record highs in Auckland, Hamilton and Canterbury, according to the Roost Home Loan Affordability report.

Affordability worsened in 12 regions as small income increases in some areas only partially offset the effects of higher house prices.

The Reserve Bank has said it does not expect its limit on high Loan to Value Ratio (LVR) mortgages to be seen immediately in housing market data. It expects to see evidence of an impact within three to six months,

Mortgage brokers report banks are being very cautious about lending to those with deposits of less than 20 per cent of the value of the property being bought. Many banks want to be absolutely sure they are within the Reserve Bank rules, which limit high LVR loans to 10 per cent of all new mortgages.

"The Reserve Bank's new policy has shaken up the bank's lending and marketing strategies," said Roost Mortgage Brokers spokeswoman Colleen Dennehy.

"Banks are being choosier about who gets a loan and what their interest rates will be, which means borrowers need all the help and advice they can get from a broker," she said.

The Roost Home Loan Affordability report shows national affordability worsened to 58.2 per cent in October from 57.3 per cent in September after the national median house price rose to $407,525 from $400,000. The report measures the percentage of after-tax pay needed to service an 80 per cent mortgage on a median priced house.

The report for October showed affordability for regular home buyers improved in Manukau, Waitakere, Wanganui, Wellington City, Timaru and Invercargill, but worsened in central Auckland, North Shore, Whangarei, Tauranga, Christchurch, Nelson and Dunedin.

It was toughest for first home buyers in Auckland. It took 101.7 per cent of a single median after tax income to afford a first quartile priced house on the North Shore in October.

Average fixed mortgage rates, which more than 50 per cent of new borrowers now use, fell slightly in October for those with more than 20 per cent equity and after-tax wages rose just over $2 per week to $816 per week. Interest rates rose for those borrowing more than 80 per cent of the value of the home.