Is it a good idea to buy a first home now? The experts are divided

Aucklander Gavin Shoebridge is leaving his hometown, so that he can afford to buy a house.

Read this story in te reo Māori and English here. / Pānuitia teini i te reo Māori me te reo Pākehā ki cars.

At the end of 2021, after 11 years overseas, he returned from the United States with a goal: buy a home.

While he had funds from cashing in his US superannuation, it wasn’t enough for a deposit, so he knuckled down to save as much as he could.

Shoebridge once had a house, but it was sold in 2008 when his first marriage ended, and he hasn’t owned one since, so he’s in the same position as a first home buyer.

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“While Auckland is a great place, it does not offer value for money when it comes to property, so I started looking at houses elsewhere in the country.”

Three weeks ago, he saw a three-bedroom, brick house with a garage, and on a 160m² section for sale in Te Kuiti. It was listed at $350,000, and he had just enough for a 20% deposit.

He told the agent to prepare an agreement, and set about getting a mortgage.

Gavin Shoebridge is moving from Auckland to Te Kuiti to buy a home.

Supplied

Gavin Shoebridge is moving from Auckland to Te Kuiti to buy a home.

He locked in a fixed three-year mortgage rate at 6.19%, which didn’t seem bad compared to the 9.7% he was paying on the house he owned 15 years agohe said.

Settlement is next week, and despite having to move towns, he could not be happier with his purchase.

Falling house prices and an increase in listings mean there are more affordable options available than last year, and some commentators say if buyers can afford to service a mortgage, it’s not a bad time to buy.

But interest rates are now around the 6% mark, and set to rise further after the Reserve Bank raised the official cash rate by 75 basis points to 4.25% on Wednesday.

So is it a good idea for first time buyers to buy a home now?

Infometrics principal economist Brad Olsen said he did not think it was a good time to buy a first home.

Higher mortgage rates were coming, but there would not be as big a fall in the house price trajectory, so serviceability would remain a huge issue, he said.

“Over the last year, the average household has been using about half their income to pay their housing costs, and many potential first home buyers simply cannot afford to service a mortgage.”

Rising interest rates mean mortgage serviceability is an issue for some would-be buyers.

KATHRYN GEORGE/Stuff

Rising interest rates mean mortgage serviceability is an issue for some would-be buyers.

CoreLogic chief property economist Kelvin Davidson said it was likely fixed mortgage rates would now push towards 7% or above over the coming months.

But house prices were expected to fall further, so they would end up down about 20% from last year’s peak, he said.

“Paying a cheaper price up front is better for buyers because they are saving money at the start, and it is money they then don’t have to pay interest on.”

The longer buyers waited at the moment, the higher rates were likely to get, he said.

“This, along with uncertainty over the labor market, will lead some first home buyers to pull back, but there will be others who can afford it, and feel secure in their employment, who will buy for the security of having their own home. “

While the overall number of sales was currently low, first home buyers’ share of sales was rising, Davidson said.

Mortgages Online director Hamish Patel said the conversation about interest rates and buying a home was emotional.

“Logic will let anyone know that the interest rates of today have little to do with a 30-year home loan term, especially when most people fix for one to three years.”

Owning a home was not easy, but the rewards were great, and so if someone was in a position where they could afford it, then that was the time to buy, he said.

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