Homes more affordable as interest rates fall

Homes became more affordable in the three months to August 31 mostly because of low interest rates, according to the Massey University Home Affordability report.

Home affordability improved by 2.3 per cent in the quarter, which was less than the 8.5 per cent improvement between February and May.

Home affordability improved 17 per cent on an annual basis.

During the August quarter there was a slight reduction in the average weekly wage and an increase in house prices but these were more than offset by a 5 per cent reduction in the average weighted mortgage interest rate.

The authors of the survey warned that the current low interest rate environment may be difficult to sustain. They said there could be a shortage of credit when bank capital adequacy ratios rise and the stimulus to the economy by the Government ends.

Nine out of 12 regions showed improvement in home affordability in the latest quarter. These were Nelson/Marlborough, Northland, Manawatu/Wanganui, Hawke's Bay, Auckland, Waikato, Canterbury/Westland, Wellington and Central Otago/Lakes.

Regions where affordability worsened were Southland, Taranaki and Otago.

Southland retains its place as the most affordable region with an index of 64.4 per cent of the national average. Manawatu/Wanganui is second with 67.4 per cent and Otago third at 74.8 per cent.

- NZPA