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Because things aren’t quite tough enough

Written By: - Date published: 9:35 am, May 9th, 2013 - 24 comments
Categories: class war, housing - Tags: , ,

Because things aren’t quite tough enough for first-time home buyers yet:

First home buyers in the firing line

First-home buyers are in the firing line as the Reserve Bank aims its first direct shot at the overvalued housing market.

They can expect to face higher interest rates if they want to borrow more than about 80% of a home’s value, under new moves revealed yesterday. That could push up the interest rate on a floating mortgage from about 5.85% to about 6%.

One banking expert has called the moves a “slap in the face” for first-time buyers. Some property investors and small businesses may also find it harder to get a big loan from a bank.

This “first direct shot” is aimed at exactly the wrong target.

24 comments on “Because things aren’t quite tough enough”

  1. just saying 1

    Some property investors and small businesses may also find it harder to get a big loan from a bank. Not to mention property investors are the group most likely to be borrowing more than 80% of the cost of a house.

    Because:
    a) Most low to middle income earners couldn’t afford the repayments on a mortagage of greater than 80 percent, unless that mortgage was being “paid off” by tenants and tax breaks. and
    b) Banks wont lend to borrowers who can’t demonstrate the ability to pay the mortgage.

    Surprise, surprise, the wealthy playing the ‘won’t someone whink of teh strugglers?’ card in their big-stakes poker games.

    I’m sorry that there will bethose who are genuinely struggling affected.
    But since when has the media given a shit about them?
    This issue is getting oxygen because the children of the comfortably middle class might be less able to afford a first home in one of the most expensive areas, and the (often tight for tax purposes) margins of of rentiers and property developers potentially being squeezed.

    • Draco T Bastard 1.1

      +1

      • Rich 1.1.1

        Most people who don’t already own a house can’t afford to buy one full-stop, even if they could get a 100% mortgage. What’s needed are decent publicly owned houses available on a lifetime tenancy to anyone who wants one.

    • AsleepWhileWalking 1.2

      +1

  2. MrSmith 2

    So what will be the out come of this policy.

    1) First home buyers will be shut out of the market for longer as they save there deposits, plus they will have to work longer and harder to meet the criteria.

    2) These extra saving will be held in banks which will then be allowed to print and lend more money into New Zealand.

    3) These first home buyers will have to live somewhere, they just won’t suddenly disappear, so they will be renters for longer pushing up demand for rental properties.

    4) As demand for rentals increases so will their value, inflating the property bubble.

    5) Who stands to benefit from this move? Anyone that can raise the extra deposit or show extra income, mainly the already rich.

  3. muzza 3

    Wonder what might happen if interest rates were not being artificially controlled….

    • Draco T Bastard 3.1

      Charging interest should be banned outright. That would remove the incentive to accumulate money and thus increase actual spending thus boosting the financial economy.

      Unfortunately, it would also contribute more to the destruction of the environment, boost climate change and use up scarce resources.

  4. vto 4

    A house is no longer only worth what someone is willing to pay for it.

    Today a house is only worth what a bank is willing to lend on it.

    And that, my friends, is the Great Distortion. Was astounded to hear yesterday that over 30% of new mortgages are over 80% lvr. That is massive.

    The ponzi scheme cancer continues to grow. And grow. And grow.

  5. ghostrider888 5

    interest rates were predicted to rise second half of this year some time ago, Hickey et al;

  6. just saying 6

    I just checked.

    It would cost $573.13 per week to service a $400,000 mortgage over 25 years with Kiwibank today (5.8% interest). Compulsary insurances, and rates would easily push that up to $700 pw
    The warehouse was recently applauded when it announced that it will pay long-term employees the princely sum of $720 per week, gross

    The median house price in Auckland is $566,000. ($810 per week before insurance and rates)

    This issue does NOT primarily concern low to low-middle income earners.
    Yet, strangely, that’s how it’s being framed.

    • Draco T Bastard 6.1

      Yep, it’s really only going to affect the high to very high income people.

    • infused 6.2

      There’s generally two people paying the mortgage. There are still many 300k houses out in the hutt valley in Wellington.

  7. AsleepWhileWalking 7

    I’d like to see houses only available after 30% deposit has been saved, but most importantly we need to make it less attractive to be a landlord.

    Home ownership = pride, stability and a greater level of control over your living environment. We also need to encourage sweat equity.

    • Draco T Bastard 7.1

      …but most importantly we need to make it less attractive to be a landlord.

      Oh, that’s easy. Change rates to a percentage of income and make it per residence owned. I suspect that being a landlord will be become unpopular very quickly.

    • Colonial Viper 7.2

      I’d like to see houses only available after 30% deposit has been saved, but most importantly we need to make it less attractive to be a landlord.

      Disagree.

      We need to make it more attractive to be a landlord (as opposed to being a property speculator). Stable solid net returns of 3% to 4% per annum if their accommodation meets tight quality requirements.

      • Draco T Bastard 7.2.1

        No, what we need is for the government to become the landlord and running the rentals at as close to cost as possible.

  8. infused 8

    Why does everyone need to own a house? Genuine question. I bought mine through a family member, because I got it for cheap, however, if I couldn’t have done this, I would never have bought a house. I don’t see a real reason to.

    It’s basically a massive ball and chain around your wallet for the next 25-30 years.

    I rented for along time before I bought my current home. The one good thing is, the landlord has to do all the work, pay the rates, etc.

    • Colonial Viper 8.1

      Good point. The vast majority of people in the world do not have their own house. And having 2 or 3 generations conducting their lives under the same roof totally standard

    • Draco T Bastard 8.2

      It’s basically a massive ball and chain around your wallet for the next 25-30 years.

      And then it’s freehold which a renter will never see, i.e, a renter has that ball and chain permanently.

      • Steve Withers 8.2.1

        Rentals in Auckland are very expensive. My mother can rent a very nice, brand new, two bedroom flat in London, Ontario, Canada (pop: 500,000 – university town) for about $850 / month. That includes all utilities (electricity, heat, water, rubbish disposal) except the phone and cable TV. There is also a swimming pool, gym, and sauna. You do pay extra to park a car in the underground parking garage. But it’s worth it in the winter when it might be -20C.

  9. Steve Withers 9

    I have two flats I rent out. I have just spent about $50,000 renovating one of them (gutted back to framing and starting over..) and it will be on the market in the next 2-3 weeks. I guess I should thank National for pouring petrol on the price of rentals by blocking home ownership for more people.

    Still won’t vote for them, though.

  10. Steve Withers 10

    In Auckland, one of the things that may affect house prices is all the people who have long family association with the city and – collectively – may own several homes across a family group. For example, the baby boomer kids of people who bought homes in the city 60-70 years ago and LONG ago paid off mortgages that would look like lunch money today, may well have inherited a home worth over a million dollars….even though they may well work at the Warehouse. I’ve known a few in the Devonport area….who don’t actually earn much money, but they are sitting in homes worth more than they could reasonably earn in the next 30 years. But they don’t sell because…they have always lived there and don’t want to. I’d like to see some study into this segment of homeowners. They may never be “first home buyers”…so much as “first home inheritors”.

    I tend to think of the economy these days being like being born into a monopoly game that started a long time ago. There are no streets left to buy. Your lot is to get your $200 and pay outrageous rents everywhere you turn. You’re always in debt for just existing……and you can accumulate capital only with good luck and with great difficulty.

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