New Reserve Bank Rules Require Aucklanders to Earn Near $200k For Average Home Purchase

Date Published: 12 February 2024

Key Facts

• Auckland residents would need to earn at least $172,000 annually to buy an average-priced house under the Reserve Bank’s new debt-to-income lending rules.
• The proposed rules, which will take effect halfway into 2022, will restrict most owner-occupants and first-home buyers to borrowing a maximum of six times their annual revenues.
• Analysts contend that the rules are intended to keep house prices in check in the long run, aiming to align house price growth with income growth more closely.
• The average Auckland house price currently stands at $1,289,768, requiring a $1,031,814 bank loan after a 20% deposit.
• Investors can borrow up to seven times their annual income under the new rules, indicating an income necessity of $147,402 per year for the same-sized loan.
• New-build houses may be exempt from the rules and up to 20% of banks’ mortgage lending might be available for borrowers who don’t meet DTI rules.
• According to critics, the restrictions may make it more challenging for buyers as banks’ discretion in assessing borrowers by assessing their savings, cash reserves, and living costs would be reduced.

Article Summary

With the implementation of the Reserve Bank’s new debt-to-income lending rules, Aucklanders might have to earn at least $172,000 a year to be able to afford an average-priced home. This new regulation, due to take effect mid-year, aims to restrict most homeowners and first-time home buyers from borrowing more than six times their annual income. This policy is expected to keep house prices in check over the long run and align house prices with income growth more effectively.

The average house price in Auckland, as evaluated by CoreLogic, is currently at $1,289,768. For home buyers, this price would require a bank loan of $1,031,814 following a 20% down payment. For property investors, who under the new rules are permitted to borrow up to seven times their annual income, an income of $147,402 per year would be needed to secure the same loan amount.

Despite the stringent rules, opportunities for lower-income homebuyers to enter the property market still exist. New-build homes might be exempt from these new regulations in order to stimulate further home construction. Moreover, discretionary provisions from the Reserve Bank could allow up to 20% of banks’ mortgage lending to go to loan applicants not meeting the debt-to-income rules.

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