Garry Singh has done the numbers, and at current interest rates, if you bought a $700,000 house with a 20% deposit, you would end up paying over $700,000 in interest on a 30-year mortgage.
“It means I’m paying double what I’m actually buying the house for,” he said.
His payments would total more than $3,000 a month, which he says would leave his family largely unable to save for vacations or emergencies, and in a “hole” they couldn’t get out of.
These are the numbers that have led the qualified mechanical engineer to give up looking for a house in New Zealand, and they are based on a comparatively cheap house, with the median home price at $989,790, according to QV.
Before the first Covid lockdown, Singh was going to open houses, talk to mortgage brokers and be ready to buy.
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Garry Singh has lived in New Zealand for almost a decade but plans to move to Australia due to high house prices and interest rates.
Now Singh and his wife, who are expecting their first child in December, are looking to Australia, specifically Perth, where he says wages are higher and house prices are lower.
“I’m pretty sure I’m not going to be able to save a single penny after the mortgage, I’m going to be stuck for 30 years, I can’t go on vacation, I can’t go anywhere,” he said.
“I am expecting my first child. I don’t want to be in a situation where I need money and I have nothing left in my savings.”
Singh is one of the many feelings the impact of interest rate hikes.
Mortgage Lab CEO Rupert Gough says interest rates Banks stress test mortgage loan applicants in it has eliminated about 30% to 40% of buyers from the market who might have bought at lower rates.
“That’s not to say they can’t buy, but they can buy less, and that’s not an acceptable amount for them,” Gough said.
“If you could afford a million dollar house last year, you can afford an $800,000 house this year.”
Gough said people were more worried about rising interest rates that the fall in house pricesor the prospect that your home might it will be worth less than what they paid for it.
Five years ago, borrowers would have been delighted to get current interest rates, but buyers were comparing current rates with Record low interest rates from the Covid erahe said
As a result, they were moving away from loans and today’s high mortgage repayments.
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Mortgage Lab chief executive Rupert Gough says buyers should seize the opportunity while there is a glut of property on the market and few buyers.
“It has to become the new norm, not the new high. That would make people comfortable with that interest rate again.”
Gough said mortgage payments could mean borrowers have less ability to save, but would be paying for an asset rather than spending money on rent.
Valocity valuation chief James Wilson confirmed that the number of buyers had plummeted as interest rates rose.
The data company’s recent State of the Nation Report showed a sustained drop in the number of first-time homebuyers, movers and investors applying for mortgages.
The number of mortgage filings for first-time homebuyers had fallen from 10,400 in the fourth quarter of last year to 4,800 during the third quarter of this year, though Wilson said the most recent figure did not include the last three weeks of the quarter.
Investor registrations had nearly halved from 6,000 to 3,100 during the same period, and the number of owner-occupants taking out mortgages had dropped from 9,800 to 4,400.
“Interest rates have had a significant impact on both mortgage market and buyer activities,” Wilson said.
“They create a ‘wait and see’ atmosphere where many potential buyers take a secondary approach.”
Wilson said it would be interesting to see what impact any spring volume increase might have on sales volumes.
Agents and banks have said that the The glut of properties coming onto the market is likely to outweigh any benefits. from the usual spring rise, and prices would likely continue to decline.
Wilson said some buyers were genuinely concerned about the size of the debt they could take on when buying a home.
“However, many buyers can overcome this by adopting a ‘utility’ mindset, ie I am buying a house to live and house myself and my family.
“Leveraging debt to access such an investment can produce significant investment returns over a 10-year holding period.”
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James Wilson says that borrowers should talk to their banks about their finances and may be surprised at the size of the mortgage they could afford.
Wilson said existing homeowners might also need to carefully consider whether they can afford to climb the ladder in today’s market.
“For many homeowners, their properties may have increased in value significantly, however, like other properties around them, if their income hasn’t increased by the same levels, they probably can’t afford to ‘improve’ their property.” .
Singh, 30, came from India a decade ago to study for a postgraduate degree and said he fell in love with the country and the people.
“I started my first job here, I studied here, there are so many memories that I made here, so many friends that I have to leave.”
Singh said that he and his wife were planning to move in a couple of years and although it would be painful, he had to think about the future of his family.
“I want my kids to grow up in the same house, where they can make memories and I can make memories.”
