NZ Home Loans getting Too Expensive?

August 27, 2014

Well, yes and no. NZ Home loans affordability has actually improved in the past month in certain areas and has got worse in others. A home loan affordability study took 24 samples of regions and out of those, 13 had improved (became more affordable). The rate of improvement of 13 regions outweighed the rate of the other 11, with South Auckland ranking as most expensive for first home buyers.

“What does that mean for us, the client?”

Not much if you are already paying for a home. Maybe just consider switching from a floating to a fixed interest rate as the outlook favours increasing rates for the foreseeable future. Fixing or floating (or a combination of both) also depends on your personal situation.

The big difference will lie firstly on where you want to acquire the property and, secondly, on how much deposit you will have. In the study, a young professional with a median disposable income would only have to utilise 21% of his income if he decides to buy a property in Wanganui but would need to utilise all disposable income and work another job if he was to contemplate buying a house in Manukau (which would cost 102.4% of the median income bracket).

“So… buy a house still?”

Of course. But only if you have planned your payments for the years to come and completed a thorough budget based on current and future interest rates. Also, never hesitate to seek the help of a Mortgage Broker. They’ll know how much you can borrow from the banks but most importantly they will recommend that you complete your own conservative budget so you go in to the purchase on the front foot.

Remember, it is not what the bank will lend you but what you are comfortable repaying. They will also protect your position with the relevant insurance in case there are an unforeseen circumstances. Property is a long-term investment and it should be considered on that basis for both your affordability purposes and capital gain.

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