Tighter rules keep it fairer

Median house prices in Auckland are more than $700,000, a couple would need to earn $186,000 a year to borrow $560,000 including ($140,000) deposit. Photo/David White

Many years ago, when I applied for my first mortgage in the UK, the most I could borrow was two-and-a-half times my annual income, or three times my and my partner's joint income.

The restriction on how much we could borrow was strictly enforced, so mortgage hunters often had to think of every penny they earned in tips, commission, bonuses and any ad hoc work they might do to get the biggest loan possible.

And although almost any figure could be declared, it wasn't unheard of for the bank or building society to want proof of income -- by way of payslips, tax forms, or bank account statements.

You also had to declare any loan repayments, and having a credit card could reduce the amount that you could borrow.

The system had two benefits. House buyers could rarely borrow more than they could afford to repay every month, and sellers knew their buyers were limited to what they could spend.

At the time, no one could borrow 100 per cent of the purchase price, and a 10 per cent deposit was a minimum requirement.

The system kept house prices down to affordable levels and allowed mortgage payers to have a reasonable standard of living.

It's changed in the UK now (although there are calls for a return to the old system). But we can see what happens when this simple lending measure is not used.

Median house prices in Auckland are more than $700,000 which, under the old UK rule would mean a couple would need to earn $186,000 a year to borrow $560,000 to add to their 20 per cent ($140,000) deposit (and have no loans to repay -- almost impossible for those who have been to university).

Melbourne

Having just returned from Melbourne, I have to say the city seems to have got it just about right when it comes to housing and public transport.

The construction of residential houses and apartments is well under way with cranes dotted across the city, building homes to rent and buy (prices from less than $300,000).

Head out of the city in almost any direction and you'll see new housing developments with what appears to be a mixture of properties across a range of budgets.

Add the tram and train services, and road network to the mix, and you have a city that supports business, residents, and visitors alike.

Perhaps the big cheeses at Auckland City council should pop across and pick up a few tips on how to fix the housing crisis.