It’s been revealed today that newly appointed Reserve Bank Governor Graeme Wheeler has been in talks with the main banks on the subject of restricting the loan to value ratios that banks can lend up to for borrowers purchasing a home. The emphasis for this seems to be Auckland’s over heated housing market with its rocketing house prices. Whilst there is no question that something must be done to stem the tide of rising house prices in Auckland making borrowers stump up with an even larger 1st home deposit is only going to end up making home ownership even less affordable.
At present the average median price for a house in Auckland is now $500,000. This would typically necessitate a deposit of $25,000 saved by the person seeking a mortgage from their bank at 95% borrowing. If the Reserve Bank has its way potentially borrowers will need as much as $50,000+ deposit which for many 1st home buyers will end any hope they have of entering the property market to begin with. If Governor Wheeler really wants to cool the Auckland market he’d be much better off asking the IRD to target the property speculators who pay no capital gains tax but make most properties unaffordable at auctions for many young couples desperate to buy their first home.
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