29 Nov 2016

Loans for first homes jump 43% in 2 years

10:12 am on 29 November 2016

The amount people are having to borrow for their first home has increased 43 percent in the last two years.

An auction sign outside a house for sale in Auckland.

Photo: RNZ / Claire Eastham-Farrelly

Reserve Bank figures show the average loan to a first-time buyer in October 2014 was $273,000. By last month, that had risen to $390,000.

The Labour Party is warning that young New Zealanders are carrying extraordinary levels of debt and are dangerously exposed to rising interest rates.

Leader Andrew Little said with a debt burden of $390,000 it did not take much of an upward change in interest rates to put real pressure on household budgets.

"With what's happening in the American economy, what's happening in the world economy the pressure on interest rates is going to start to rise pretty much from now.

"And we should expect an increase in interest rates to start to happen over the next year."

Labour estimated the increase in the average first home loan had added $300 a fortnight to repayments.

Housing Minister Nick Smith said he will comment later today, after receiving advice from officials.

Mr Little told Morning Report part of the answer was building a large volume of affordable homes, over time.

"The price at which you sell to your first home buyer is much lower than what it is at the moment."

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