Loans door shutting on first-home buyers

RICHARD MEADOWS AND VERNON SMALL
Last updated 05:00 16/07/2013
Opinion poll

The Reserve Bank's restrictions on home loans will:

Cool Auckland house price rises

Lower house prices in the rest of the country

Shut out most first home buyers

Favour property investors

Cause a mass raid on KiwiSaver for deposits

All of the above

Vote Result

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One in every two to three first-home buyers could be shut out of the housing market as the Reserve Bank forges ahead with controversial restrictions on home loans.

Banking sources say the central bank will announce new rules within the week that will rein in riskier mortgage lending to 12 per cent of new loans.

The changes will dramatically reduce the amount of high loan-to-value (LVR) loans that the banks are writing, making it much harder to get a mortgage with a deposit of less than 20 per cent.

In theory, the new regime could strip close to $2 billion out of the loan market in a year, equal to more than 4000 homes at average prices.

Prime Minister John Key's attempt to pressure the Reserve Bank to "carve out" an exemption for first-home buyers appears to have failed.

The sources said tensions between the parties had run high as governor Graeme Wheeler refused to water down the policy tool.

"My understanding is that all the efforts of Government to slow them down on the decision have not been successful," they said.

Labour's housing spokesman Phil Twyford said Key's "crocodile tears" were not good enough. "The very people that they claimed to be wanting to protect are the victims of this policy."

Mr Twyford said prices were spiralling out of the reach of first-home buyers.

Lending limits would prevent poorer families becoming homeowners.

"It advantages property investors and locks out first-home buyers," he said.

Bankers' Association chief executive Kirk Hope said the rules would have "perverse consequences" and lock buyers out of the market.

About 70 per cent of first-home buyers got their foot in the door with a deposit of less than 20 per cent, he said.

The Reserve Bank, which is committed to financial stability, is worried that as much as 30 per cent of the banks' new mortgage lending is high risk.

That is much higher than the historical average of roughly 20 per cent, and could leave home-owners in serious trouble if house prices fall suddenly.

Limits on LVRs were announced in the Budget as part of a commitment to housing affordability.

However, the policy may have backfired.

The new rules will leave the Government scrambling to find other ways to avoid a further squeeze on first-home buyers.

Those are expected to include boosting supply, through fast-tracked "greenfields" new developments, and allowing higher thresholds for access to Welcome Home Loans.

Ministers are also considering allowing those in KiwiSaver to withdraw more of their savings to use as a deposit.

Here's how much you will need to save for a house deposit around the regions:

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WELLINGTON

Average house price: $525,245

20 per cent deposit: $105,049

KAPITI COAST

Average house price: $363,142

20 per cent deposit: $72,628

PORIRUA

Average house price: $377,29

20 per cent deposit: $75,458

UPPER HUTT

Average house price: $334,336

20 per cent deposit: $66,867

LOWER HUTT

Average house price: $367,696

20 per cent deposit: $73,539

TAUPO DISTRICT

Average house price: $347,876

20 per cent deposit: $69,575

HASTINGS DISTRICT

Average house price: $299,270

20 per cent deposit: $59,854

NAPIER

Average house price: $324,102

20 per cent deposit: $64,820

PALMERSTON NORTH

Average house price: $285,693

20 per cent deposit: $57,138

MASTERTON DISTRICT

Average house price: $237,345

20 per cent deposit: $47,469

- Fairfax Media

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