First home buyers facing repayment headwind

Getting a foot on the home ownership ladder can be challenging – particularly in the face of interest rate increases and speed limits on high loan-to-value ratio (LVR) mortgage lending. CANSTAR has analysed the increase in average home loan repayments over the past decade when compared to inflation, and the news for first home buyers is not good, particularly for homebuyers in Auckland.

The bad news?

Over the past ten years, average property values in New Zealand have been very healthy. It’s great news for established property owners and investors, but not so good for buyers trying to get into the market. It means that median home loan repayments for New Zealand in general have surged by 51% over the past decade. In Auckland, repayments are up by 61%. That compares to general inflation over the same timeframe of just 28.5%.

The good news?

Average home loan interest rates are 1.5% lower than they were ten years ago – in May 2004 the average home loan rate was 7.70% compared with 6.20% now. That is keeping a lid on the repayment pain for first homebuyers. On 2004 levels, Auckland buyers with a $500,000 loan would be paying around $440 more per month than they currently are!

So – what are the current repayment levels?

Here are the median property value, loan size and repayment levels for Auckland, Wellington and New Zealand overall in May 2004 and May 2014.

Property Location May-04 May-14 Difference in repayment Inflation
Property Value1 Loan Size2 Loan Repay3 Property Value1 Loan Size2 Loan Repay3 $ %
Auckland $339,000 $271,200 $2,040 $625,000 $500,000 $3,283 $1,243 61% 28.50%
Wellington $262,500 $210,000 $1,579 $412,500 $330,000 $2,167 $587 37% 28.50%
NZ total $248,000 $198,400 $1,492 $430,000 $344,000 $2,259 $767 51% 28.50%
Source: REINZ Market Facts R100 – Median Housing Prices. 2. Loan size is based on a 20% deposit. 3. Monthly Loan repayment based on a 25 year loan and using the average interest rate obtained from RBNZ, M10 Housing for the relevant month and year. This comparison does not include fees and charges.

Want to know more?  Consumers can download CANSTAR’s First Home Buyer Award report here.


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