house prices NZ

PHOTO: Inflated house prices and higher interest rates don’t bode well for first-time house prices. Photo: 123RF

Yesterday’s rise in the official cash rate is being described as a kick in the guts for first home buyers.

Banks moved quickly to pass on the hike in the cost of borrowing by adding between 0.15 and 0.2 percent on to floating rates.

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First Home Buyers Club director Lesley Harris said the one thing that was keeping the door slightly ajar for those looking to get on to the property ladder for the first time, was record low interest rates.

But now that had gone as well.

“It’s hard enough to get a deposit together let alone try and get the lending based on what the properties in New Zealand are now worth. Nothing’s really lining up particularly well for first-time buyers and this is just another blow.”

Harris said because most first home buyers were just able to afford their house and no more, every percentage point lift in the amount the banks were charging, made a huge difference in terms of what they could afford.

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“It’s kind of a kick in the guts because people think, right we’re just about there, you know, we can afford to borrow $600,000, we’ve got pre-approval. As soon as interest rates move, that $600,000 that someone can borrow on their income, unless they’ve had a miraculous you know, pay increase, that borrowing might change down to $550,000 or $500,000.”

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