KEY POINTS:
Brendon Bowie hasn't taken any Christmas holidays this year. He can't afford to.
Mr Bowie, 30, and his fiancee Charlene McFarlane, 29, have just taken out a mortgage for 100 per cent of the cost of their modest home in Birkdale, Auckland, which cost them $397,000.
They are paying back $1500 a fortnight. They budgeted for that, but not for the extent of legal fees and other costs involved in buying the house, plus the usual costs of Christmas.
"I'm taking Christmas Day and Boxing Day - just two days off this year," Mr Bowie said just after making the first fortnightly payment in the week before Christmas.
"We just didn't work it into the bargain. Perhaps it was a really silly time for us to buy just before Christmas."
The couple are among a growing number of first home buyers who are willingly taking on huge financial burdens by borrowing 100 per cent of the cost of their homes.
"Going back three or four years, 100 per cent mortgages were only available through non-conforming type entities and second-tier lenders," says Mortgage Brokers Association chairman Geoff Bawden.
"Now you have a situation where most, if not all, of the mainstream bank players are able to offer 100 per cent funding on reasonable terms."
Most brokers put 100 per cent loans at around 5 to 10 per cent of all new mortgages. Mike Pero Mortgages chief executive Sandra Pigram says they are 10 to 15 per cent of her business.
Westpac has recently gone further and offered to consolidate borrowers' existing debts into mortgages worth up to 110 per cent of the value of a house, although its housing product manager Mike Davy cautions: "There is no guarantee that they will get the 110 per cent mortgage and there is no formal policy around it. It's assessed on a case-by-case basis."
Easier financing has helped to push up house prices. Although brokers say they aim for mortgage payments of no more than 30 to 35 per cent of household incomes, the Reserve Bank says the average is now nudging 50 per cent (see graph).
Borrowers like Mr Bowie and Ms McFarlane are willing to pay that price to get "the Kiwi dream" of a house.
"We are not good savers," says Ms McFarlane.
"We are part of that generation. There are so many people that we know of our age with young children who are not savers, but are willing to put in the work to pay something off."
Mr Bowie says house prices were rising beyond their capacity to pay: "If we didn't do it soon, we probably never would have been able to afford to do it. Worst case scenario, if we had to come out in six months, hopefully we can make a bit from what we spent."
But taking on such debt means earning as much as possible - which means working longer.
Mr Bowie, an abseiler who scales high-rise buildings to do repairs for a property maintenance company, is a self-employed contractor.
"My hours can vary between 40 and 60 a week," he says.
Ms McFarlane, a naval chef, worked only part-time at home for nine months after the couple's second daughter was born, but returned to a 40-hour job at the Devonport base last July partly because she knew the bank would need two fulltime earners to approve a 100 per cent mortgage. She put the baby in the naval childcare and education centre.
"It's fantastic, so I'm quite confident sending the children there," she says.
On top of her day job, she has just taken on a Tupperware role and expects to do two or three sessions a week. But that's mainly to finance a trip to a Girl Guide camp in Britain.
"It would be nice if we could afford for one person to work say two days and spend the other three days at home with the kids," says Mr Bowie.
But Ms McFarlane cuts in: "I'm not that person, though. I actually enjoy being in the Navy."
Other 100 per cent borrowers, such as engineering draftsperson Sally Sanderson, 33, have found higher-paying jobs to help pay the mortgage. She now gets up in her Tuakau house at 3.30am to get to work in Mt Roskill by 5am, works until 4pm and does a 55-hour week.
Training adviser Lee Smith and toolmaker husband Paul borrowed $435,000, 95 per cent of it interest-only at first, to buy two houses on a Mangere East property in March, with payments of just over $3000 a month.
They have rented out both houses for a total of $2600 a month, claim the $400 difference plus other costs as tax-deductible, and end up with the houses costing them only $10 a week.
"To be honest, it's had no impact on our work," Ms Smith says.
Although the Smiths are first home-buyers and pay rent for the home they live in, their case shows how the tax system allows rental property investors to pay more than people who want to live in their own houses, forcing young buyers to work long hours to pay for their first homes.
The Reserve Bank says 15 per cent of mortgages are now interest-only - mainly for rental property investors who have no incentive to repay principal because only interest payments are tax-deductible.
The bank has suggested ringfencing tax deductions to offset tax payable only on income from the houses concerned, as applied until 1991.
But efforts by Finance Minister Michael Cullen to look into this were stymied last year when he failed to gain political support for the move.
