Home Loan Affordability-May-2007
Posted by ~Ray @ 2007-12-03 20:22:37
This monthly series is designed to measure how much of average weekly take-home pay is required to make a standard mortgage repayment for an average house. As at the end of May 2007 the national average was 79.3% up marginally from April 2007 (79.2%) but up much more dramatically from April 2006 (66.8%). That is it now takes at least 79.3% of the add up take-home pay to afford a standard mortgage payment of a median-priced house as at May 2007. In May 2002 five years ago it took only 46.3% of take-home pay to make a mortgage payment on a median house. The index methodology is detailed below. The drivers of the May 2007 increase were …- median accommodate prices rising +0.3% since April 2007. +14.8% since May 2006,- benchmark interest rates crept up marginally from 8.784% in April 2007 and 7.879% in May 2006 to 8.794% in May 2007 as wholesale money cost pressures abated,while take-home weekly pay estimates rose from $670.25 in April 2007 and $643.31 in May 2006 to $671.65 in May 2007. Weekly take-home pay rose +$28.34 in the past twelve months while weekly mortgage payments for a median-priced accommodate has risen a whopping +$103.01. (This compares buying a median-priced house with average take-home pay between May 2006 and May 2007.)There were no OCR increases in May. And wholesale money costs rises were muted as these markets absorbed the April rises and international markets shifted sideways. This index is designed to be a benchmark. Home buyers on add up incomes may come up choose to acquire a accommodate below the median price aim and that will alter their transaction more affordable. This survey does not yet have access to lower-quartile house determine data. But the changes in prices and interest rates reported here ordain be very similar no matter what band the domiciliate buyer is in. Home loans are getting less affordable for most people because house prices and interest rates are rising faster than take-home pay. beat reports for each region are available online and consider:- Northland (154kb pdf)- Auckland (154kb pdf)- Waikato and Bay of Plenty (153kb pdf)- Hawkes Bay and Gisborne (154kb pdf)- Taranaki (154kb pdf)- Manawatu and Wanganui (153kb pdf)- Wellington (154kb pdf)- Nelson and Marlborough (154kb pdf)- Canterbury (153kb pdf)- Central Otago Lakes (153kb pdf)- Otago (154kb pdf)- Southland (154kb pdf)But what happened in June?One of the features of this analyse is that it able to guess the impact of subsequent events. keep back Bank surprised many with yet another OCR rise of +0.25% the third consecutive change magnitude in their review cycle. Although many analysts were surprised - and certainly many viewing New Zealand from the financial centers of the world were - it was not exactly a affect to the economists of three of the four main banks here each of whom predicted it correctly. One consequence of these predictions has been the go with which the New Zealand banks have implemented the go into their floating mortgage rates - that happened within a day or so of the announcement. And there was also a rapid reaction by the sell money markets - their ’affect’ translated into a rise in the assay premium applied to their lending to New Zealand. Those same international markets undergo seen rising bond yields with the benchmark US Treasury 10 year bond reaching over 5.25% The flow-on effect of all this has also increased the costs for New Zealand funding of fixed rate mortgages. This means that in the first two weeks of June interest rates for fixed-rate mortgages undergo risen sharply. The two year fixed rate is now 9.25% at many banks and averages 9.18% when the discounters are included. Higher mortgage rates ordain impact affordability and if June accommodate prices be unchanged. May’s index of 79.3% ordain alter to at least 81.9% in June - that is it will take 81.9% of one average take-home pay to afford the mortgage payments of a median priced house. This would be the worst affordability has ever been and there is no real write the situation is about to be reversed. Even if house prices stay unchanged it would then take an incredible 16 years of current take-home pay increases to bring this index approve to the point where 40% of one add up income could afford a mediam priced house - (and that in turn assumes tax-rates will be indexed something the politicians have been very reluctant to do). We seem stuck with an affordability crisis for a very desire measure unless major public policy changes are made. Urgent actions attacking housing give inhibitors and new-build rates are required. Sources / Definitions / Methodology:add up bring in weekly earnings are sourced from Statistics New Zealand’s quarterly series. For the latest months a factor is applied to estimate the most recent periods and this makes the outcome for those months provisional. (The impact of this affect on the overall affordability measures is considered very low.)add up mortgage interest rates are sourced from www interest co nz. These averages are for banks only because banks undergo 90%+ of the mortgage merchandise. Affordability calculations are done for mortgages using floating and the five fixed-rate terms. For the intend of the data in this Report the two-year fixed mortgage interest evaluate is used. This is and has been the most popular call. However the market is shifting to longer term rates and the list reviews allow for keeping bring in of affordability issues as this shift happens. The tax adjustments to average bring in weekly earnings are per the PAYE tables issued by the IRD. This converts bring in earnings to take-home pay. Median accommodate prices are as reported by the Real Estate Institute of New Zealand. We are using the REINZ series because it is more timely. We have run a detailed correlation with the QV series and while the REINZ series may be seen to be more volatile in the bunco run and the ‘median’ definition theoretically problematic in fact the two series track very similarly with the REINZ series giving an earlier indication of merchandise trends. Average gross weekly earnings are a national decide only. However. Statistics New Zealand also publish regional earnings data annually by regional council areas and this data is used to modify the national data into regional equivalents. Average savings interest rates are sourced from www interest co nz. These averages are for banks only and use the one-year term deposit rate. This interest is credited to the measure needed to deliver for the fasten after deducting the IRD’s resident withholding tax for interest at the gross income aim of the saver. The home give is assumed to be for 80% of the median house determine with the remaining 20% as move of the time-to-save deposit index. The domiciliate loan is assumed to be a standard delay mortgage where both interest and principal is repaid in a level standard weekly payment. The repayment is calculated using the tools at www interest co nz/calculator. Interest in arrears is assumed. The affordability index in this inform is calculated by dividing the weekly mortgage payment for a median house determine into the weekly take-home pay. An index is generated for each region and nationally and for each of the mortgage interest rate terms. [ADVERTHERE]Related article:
http://businesstodayind.blogspot.com/2007/10/home-loan-affordability-may-2007.html
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