Reserve Bank warns of mortgage stress
The warning contrasts with many housing commentators highlighting the opposite scenario.
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Rich List
The Reserve Bank is warning of a potential fall in house prices as borrowers pile into mortgages.
The Reserve Bank’s weekly measure of new mortgages was above $1 billion – the first time since 2009.
It simultaneously warned of a possible fall in house prices and expressed concerns about households’ ability to cope with mortgage repayments in an economic downturn.
The warning contrasts with many housing commentators highlighting the opposite scenario – that New Zealanders have a dangerous love affair with housing and another boom requires new taxes to dampen enthusiasm.
That scenario seems a long way off. In spite of favourable interest rates the housing market is subdued with numbers of houses being traded at half the volumes of the boom period of 2003 to 2007. And building consent trends remain the weakest for 18 years.
In spite of some wild predictions in 2008 of a 30% fall in house prices, they remain about 5% below the November 2007 peak (accounting for inflation takes the real decline to about 13%).
Some agencies have reported more interest in first home buyers over the past few months, which may account for the rise in mortgages, along with relocations in Canterbury. Housing affordability has improved this year with low interest rates, although some analysts consider prices remain far too high when compared with incomes.
The wild card table highlighted by the Reserve Bank is the European debt crisis and whether the contagion would spread to this country
Chris Hutching
Thu, 08 Dec 2011
Thu, 08 Dec 2011
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Reserve Bank warns of mortgage stress
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