Home affordability slips again

Housing affordability has become a major economic and political issue and the latest figures from interest.co.nz will add fuel to the debate on how young New Zealanders will finance their first home.

The March report from the Roost Home Loan Affordability report says home loan affordability worsened across most of New Zealand during the month at the fastest rate since January 2002.

Median house prices and interest rates both started to rise in the month.

A 6% rise in the national median house price in March from February drove most of the deterioration.

The Reserve Bank's decision to raise the official cash rate (OCR) by 0.25% on March 13 drove the rest of the increase in borrowing costs measured in the reports.

The Reserve Bank is expected to lift interest rates again tomorrow to 3%.

Banks passed on the increase in full to floating mortgage borrowers and average fixed mortgage rates had risen around 0.7% in the past eight months in anticipation of the Reserve Bank's tightening.

The central bank's imposition of a speed limit on low deposit mortgages in October also cooled activity and prices in the housing market in recent months, although medians continued to rise, the Roost report said.

Roost home loans spokeswoman Colleen Dennehy said banks were increasing their appetites to lend to both high-deposit and low-deposit borrowers and brokers reported banks were returning to the market in droves now they had adjusted to the Reserve Bank's speed limits.

''The banks are back, looking for high loan-to-value borrowers and are doing deals for those borrowers who are well organised and argue their case well through a broker,'' she said.

The Roost report showed national affordability worsened to 63.3% in March from 58.8% in February after the national median house price rose to $440,000 from $415,000 in February.

That was the largest increase in the borrowing costs percentage since January 2002.

Average floating mortgage rates rose the full 0.25% to 6.01% in March and the advertised two-year mortgage rate rose to 6.13% from 5.96% at the end of February. It was up from 5.4% in May last year.

The report showed affordability for ''regular'' home buyers worsened in 19 cities, including all of Auckland, Waikato, Bay of Plenty and all of the South Island, except Invercargill.

It was toughest for first-home buyers on the North Shore of Auckland, which kept the title of the least affordable city.

It took 109.1% of a single median after-tax income to afford a first-quartile priced house on the North Shore in March, up from 103.4% in February.

The median weekly take-home pay for a ''typical'' buyer was $826.66 in March, up 2.4% from March last year.

Five years ago, the median take-home pay was $720.35.

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