Source: Radio New Zealand
Westpac said about one in six new home loans taken out so far this year had been for $1 million. RNZ
Some borrowers are starting their homeowning lives owing more than $1 million in mortgages.
Loan Market mortgage adviser Karen Tatterson said it was more common for people to take out million-dollar mortgages than people might think.
“We regularly settle loans over $1 million. The average loan size is around $800,000 to $850,000.”
She said that was across all buyer types.
Westpac said about one in six new home loans taken out so far this year had been for $1 million.
Cotality’s recent first-home buyer report showed that the median price being paid by first-home buyers in Auckland was $900,000.
“The greatest concentration of million-dollar mortgages would certainly be in Auckland,” Cotality’s chief economist Kelvin Davidson said.
Cotality’s chief economist Kelvin Davidson. SUPPLIED
“It’s the biggest market and also has reasonably high valued real estate. Proportionally, there would be a smattering in other expensive markets … if you’re going to enter an expensive market with debt you’re probably going to have quite a lot of debt.
“In terms of the proportion of the market, the share would be high elsewhere too but in terms of sheer numbers, it’ll mostly be in Auckland because that’s the biggest market and reasonably high value.”
He said those areas would often have higher incomes, too. The highest incomes in the country tend to be recorded in Auckland and Wellington.
“For a couple earning solid salaries, the debt-to-income ratio would look more manageable. It may not be so manageable for people outside Auckland.”
People with larger mortgages may have been watching the recent falls in house prices with some concern but Davidson said the key thing for all borrowers was that they could afford to service their mortgage over the lifetime of the loan.
He said there would currently be a reasonable number of households in negative equity, owing more than their homes were worth.
“It doesn’t necessarily matter – if you’re servicing the debt, the bank isn’t going to come knocking. The bigger concern, much more than negative equity, is simply serviceability and that’s going to come down to keeping a reasonable income and keeping a job.
“That’s always going to be the key thing and I suppose at the moment there’s a wee bit more uncertainty about that, will employment hold up where it is now, there could be some job losses … that servicing is always going to be a key thing and that’s what the bank is going to watch rather than necessarily the size of your debt.”
Squirrel chief executive David Cunningham said people taking on a mortgage that size would have to be prepared to cover large repayments.
“If the affordability was tested at 7 percent, for a 30-year term the annual payments would be around $80,000 for a $1 million loan. Taking account of tax and living expenses, that would imply household income of $200,000.”
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