{"id":545896,"date":"2026-07-27T08:20:27","date_gmt":"2026-07-27T08:20:27","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/545896\/"},"modified":"2026-07-27T08:20:27","modified_gmt":"2026-07-27T08:20:27","slug":"interest-rates-and-incomes-driving-home-loan-affordability-not-prices","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/545896\/","title":{"rendered":"Interest rates and incomes driving home loan affordability, not prices"},"content":{"rendered":"

<\/p>\n

Mortgage interest rates and incomes are now the main drivers of changes in housing affordability for first home buyers, as house prices at the bottom of the market go nowhere.<\/p>\n

According to the Real Estate Institute of New Zealand (REINZ), the national lower quartile selling price was $585,000 in June this year, back to almost exactly where it was five years ago.<\/p>\n

The lower quartile price is the price point at which 25% of selling prices are below and 75% are above, representing the most affordable end of the housing market.<\/p>\n

In June 2021 the lower quartile price was $586,000. It then rocketed up to a peak of $670,000 in November 2021 during a debt-fuelled price boom engineered by the Reserve Bank and fuelled by the trading banks, before plunging back to its recent low point of $567,500 in February 2023.<\/p>\n

Since then there have been monthly movements up and down, but overall it’s gone nowhere for the last three years and is now $1000 less than it was five years ago.<\/p>\n

So price movements are not currently a big factor in changes to affordability. Interest rates and incomes are now the main drivers.<\/p>\n

The average two year fixed mortgage rate bottomed out in the current cycle at 4.49% in November last year, and has increased in every month since to 5.26% in June this year.<\/p>\n

That pushed mortgage payments on a home purchased at the national lower quartile selling price up from around $741 a week to $764, over that period, assuming it was purchased with a 10% deposit. That’s an increase of $23 a week.<\/p>\n

Interest.co.nz estimates over the same period, the combined after-tax pay of a couple working full time at the median rates of pay for people aged 25-29, would have increased from $2170 a week to $2189. That’s up $19 a week.<\/p>\n

So the extra $23 a week in mortgage payments since November last year as a results of rising interest rates has been almost balanced out by rising wages.<\/p>\n

However, household budgets will also be under pressure from other rising costs, which will be making life more difficult for aspiring first home buyers.<\/p>\n

At the national level, mortgage payments on a home purchased at the lower quartile price with a 10% deposit would eat up 35% of a typical first home buying couple’s after-tax pay.<\/p>\n

That’s well within affordable limits with mortgage payments not considered unaffordable until they take up more than 40% of after-tax pay.<\/p>\n

The last time they were above 40% was in July 2024, when the average two year fixed rate was 6.50%.<\/p>\n

All of this suggests that for the time being, first home buyers may be in something of a sweet spot, even though interest rates are rising.<\/p>\n

The main exceptions to this are Auckland, Tauranga and Queenstown, with housing remaining at unaffordable levels in those areas for typical first home buyers on average incomes.<\/p>\n

The graph below shows the movement in the REINZ’s national lower quartile price over the last five years.<\/p>\n

The tables below show the main affordability measures for homes purchased at the REINZ’s low quartile price with either a 10% or 20% deposit, in all main urban areas throughout the country.<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n

\"\"<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Mortgage interest rates and incomes are now the main drivers of changes in housing affordability for first home…\n","protected":false},"author":2,"featured_media":545897,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[138,111,139,69],"class_list":["post-545896","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/545896","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=545896"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/545896\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/545897"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=545896"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=545896"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=545896"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}