First-home buyers are being "cruelly" denied the chance to buy houses at a time of record low interest rates and plateauing prices because of rules forcing them to save enormous deposits.

That's the opinion of Century 21 national manager Ryan Mitchell, who called for the Reserve Bank of NZ's "outdated" rules for deposits to be changed.

The rules require most first-home buyers to save at least 20 per cent of the value of the house they wish to buy before banks are permitted to give them a home loan for the rest.

"The blanket high deposit requirements are sadly and simply keeping too many first-home buyers out of the housing market," Mitchell said.


"It's actually cruel that so many are denied the opportunity of home ownership during a time of record low interest rates and steadying prices because of this outdated and unnecessary measure."

His comments come as the Reserve Bank today published findings from its review of the rules, known as loan-to-value-ratios or LVRs.

The bank conceded the measures had "disproportionately" hit first-home buyers, but argued they were necessary to make the financial system resilient.

Introduced in 2013 at a time of skyrocketing Auckland house prices, the regulations aimed to avoid a large-scale banking collapse by cooling price growth and ensuring home buyers could afford their mortgages.

"The LVR policy is likely to prevent some households that wish to purchase housing from doing so, which is part of the process of safeguarding financial stability," the bank said.

It said data by analysts CoreLogic showed the share of house sales to first-home buyers had fallen from 25 per cent before the rules came into place in October 2013 to 20 per cent by early 2014.

The Reserve Bank should loosen its tight loan-to-value ratios for first-home buyers Century 21 national manager Ryan Mithcell says. Photo / Nick Reed
The Reserve Bank should loosen its tight loan-to-value ratios for first-home buyers Century 21 national manager Ryan Mithcell says. Photo / Nick Reed

However, house prices have steadied over the last two years and interest rates have plunged to 50 year lows.

Auckland's median price last month sat at $850,000, the same price as in April 2018, according to the Real Estate Institute of NZ, while one of the country's major banks is still offering a three-year fixed term home loan rate below 4 per cent.


This has helped first-home buyers fight their way back into the market.

They became Auckland's largest buyer group during the first three months of this year, snapping up 27 per cent of all homes for sale.

But Mitchell argued many more first-home buyers were still locked out of the market because of the Reserve Bank's LVRs.

CoreLogic data in February showed Auckland first home buyers were paying an average of $856,467 for their properties, meaning a 20 per cent deposit would equate to $171,293.

"Many couples could easily service a mortgage but struggle to come [up] with a 20 per cent deposit, not helped by high rents and living costs," Mitchell said.

"In many cases the required deposit in Auckland is at least $200,000. That's a huge barrier to entry."

However, financial website's latest Home Loan Affordability Report released today said Auckland had become significantly more affordable for first-home buyers.

It found a typical young couple, aged 25-29 and both on full time wages, earned a median salary of $1666 a week.

It also assumed they would have saved a $76,504 deposit by putting aside 20 per cent of their net pay each week for four years.

To then buy one of Auckland's cheaper homes, the couple would need to apply for a $593,496 loan that would require weekly payments of $651.

These payments would in turn account for 39.1 per cent of the couple's weekly take-home pay. defines affordability as being when mortgage repayments are less than 40 per cent of the couple's take-home pay.