Mortgages most Affordable for Seven Years

A mortgage became the most affordable in seven years in January as house prices fell and low interest rates lifted home buyers’ purchasing power, a report shows.

A slight rise in weekly wages and the benefits of last year’s income tax cuts for those on higher incomes boosted affordability to its best levels since February 2004, according to the latest Roost Home Loan Affordability report.

The proportion of a single median after-tax income needed to service an 80 per cent mortgage on a median-price house has improved to 51.7 per cent from 53.8 per cent.

For the Wellington region mortgage payments took up 52 per cent of the median weekly take-home pay, compared with 61.8 per cent a year ago and 81 per cent in January 2008.

The Hutt Valley was the most affordable at 45.7 per cent of take-home pay, and the Kapiti Coast became less affordable than in December at 58.1 per cent.

“Home buyers have the upper hand in many areas where house prices are flat to falling.”

A first home had become dramatically more affordable for young couples over the last five years. It now cost less than a quarter of the median wage to pay for an 80 per cent mortgage on a house worth $245,000.

The average price of a house in the lowest quartile of home values has come down from its peak of $257,100 in March last year.

The national median house price fell to $340,000 in January, compared with $352,000 in December. Affordability has been improving since the end of 2009.

Queenstown is the most expensive place in New Zealand while Whanganui has replaced Invercargill as the cheapest.

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