Home loan affordability falls to low point

Rising house prices and interest rates combined in August to weaken home loan affordability to its worst level in 2009, the BNZ Home Loan Affordability measure shows.

The apparent recovery in the housing market and higher long term interest rates are adding to pressure on affordability caused by virtually no income growth and rising unemployment, the monthly measure calculated by Interest.co.nz found.

The BNZ Home Loan Affordability measure for all of New Zealand showed the proportion of a single median after tax income needed to service an 80 per cent mortgage on a median house rose by 2.5 percentage points to 58.7 per cent, its highest level in 2009 and its biggest deterioration in 15 months.

The median house price rose 2 per cent in August to NZ$347,000 from NZ$340,000 in July and is now just 1.4 per cent below its November 2007 peak of NZ$352,000. The average 2 year fixed mortgage rate, which has been among the most popular with borrowers in recent years, rose 25 basis points to 6.5 per cent over the month and has now risen from an average 5.9 per cent in February. Variable mortgage rates, meanwhile, have fallen in the last month, meaning some borrowers may have chosen to go variable rather than fixed to improve their immediate affordability.

Meanwhile median incomes have been flat in the last month and have fallen slightly from April after a slight increase in the ACC earner's levy and very flat wages growth.

To read the full NZ Herald article click here

Posted: 21 Sep 2009

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