First-time homeowners scheme announced as mortgage repayment hit four year low

The government announced ahead of the election a fund to help low-income first-time buyers into the property market, just as a report announced that mortgage repayments have hit a four-year low.

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Auckland announced as first out of blocks in housing scheme for first time buyers

The Government on Friday took its first step towards helping more New Zealanders into their first homes via progressive home ownership, by giving two community organisations a total of $23 million to scale up their existing offerings.

The Housing Foundation in Auckland received $17 million to deliver 78 homes mainly through its Shared Home Ownership Programme, and also its Rent to Own offering.

This has been a long time coming from the government, announced at the beginning of their tenure, as part of the Green Party's supply and confidence agreement with the Labour Party in forming the government, and come well timed in the run-up to the Sept. 20 elections.

Greens co-leader Marama Davidson stated that it was a huge step forward to get more kiwis into their first home, "This fund means more low-income families who have been locked out of the housing market will finally have a chance at owning their own home."

To qualify applicants must be older than 18, must be a first-home buyer or 'second chancer', must be citizens, permanent residents, or resident visa holders, have a household income below $130,000 and be able to secure a commercial mortgage and have some money for a deposit.

Housing Minister Megan Woods also commented on a proposed “rent to buy” scheme, stating that work was underway to establish an initiative within Kāinga Ora for households with an annual income of under $130,000 to receive shared ownership support directly from the Government and is expected to be available in early 2021.

First time mortgage payments the most affordable they've been in nearly four years

According to a recent Home Loan Affordability Report, the rapid decline in mortgage interest rates since the COVID-19 crisis started to bite has made the mortgage payments on a starter home the most affordable they have been in nearly four years.

The average of the two-year fixed mortgage rates offered by the major banks was 3.52% in February before severe lockdown restrictions were put in place and had fallen to 2.76% in June. Over the same period the Real Estate Institute of New Zealand's national lower quartile selling price moved marginally, from $458,500 in February to $452,000 in June, after briefly peaking at $480,000 in March.

In Auckland, the most expensive region in the country where the lower quartile price was $726,000 in June, falling interest rates saw the mortgage payments on a lower quartile-priced home drop from $581.06 a week in February to $547.57 a week in June, a saving of $33.49 week, while the ratio of mortgage payments to net pay dropped from 33.8% to 31.6% over the same period.

-by Ravi Mehta, from Professional Financial Solutions