“If I buy a house for $700,000, I will pay double the interest”

Garry Singh crunched the numbers and, at today’s interest rates, if he bought a $700,000 house with a 20% down payment, he’d end up paying over $700,000 in interest on a 30-year mortgage. .

“That means I’m paying double the amount I’m actually buying the house for,” he said.

His repayments would amount to more than $3,000 a month, which he says would keep his family from saving for vacations or emergencies, and into a “hole” they couldn’t get out of.

These are the numbers that led the skilled mechanical engineer to stop looking for a home in New Zealand, and they’re based on a relatively cheap home, with an average house price of $989,790, according to QV.

Before the first Covid lockdown, Singh was going to open houses, talk to mortgage brokers and ready to buy.

READ MORE:
* House prices are falling, so houses are more affordable! ? not so fast
* A 40-Year Mortgage: What Could Go Wrong?
* New Zealanders with home loans enjoy low rates

Garry Singh has lived in New Zealand for nearly a decade but plans to move to Australia due to high property prices and interest rates.

alex cairns/stuff

Garry Singh has lived in New Zealand for nearly a decade but plans to move to Australia due to high property prices and interest rates.

Now Singh and his wife, who are expecting their first child in December, are looking to Australia, particularly Perth, where he says wages are higher and house prices lower.

“I’m pretty sure I won’t be able to save a 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’m expecting my first child – I don’t want to be in a situation where I need the money and I have nothing left in my savings.”

Singh is one of many feeling the impact of rising interest rates.

Mortgage Lab chief executive Rupert Gough said bank interest rates have eliminated about 30-40% of buyers who could have bought at lower rates in the market.

“That doesn’t mean 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 concerned about rising interest rates than falling house prices, or the prospect of their home being worth less than they paid for.

Five years ago, borrowers would have been happy to secure today’s interest rates, but buyers were comparing current rates with record Covid-era interest rates, he said .

As a result, they were hesitant to borrow and high mortgage repayments today.

Mortgage Lab managing director Rupert Gough said buyers should seize the opportunity, as there is a glut of properties on the market and few buyers.

Provided

Mortgage Lab managing director Rupert Gough said buyers should seize the opportunity, as there is a glut of properties on the market and few buyers.

“This needs to become the new normal, not the new high. This would make people feel comfortable with that interest rate again.

Gough said mortgage repayments could mean borrowers had less ability to save, but they would be paying off an asset rather than spending money on rent.

Valocity’s head of valuation, James Wilson, confirmed that the number of buyers had fallen as interest rates rose.

The data firm’s recent State of the Nation report showed a steady decline in the number of first-time home buyers, movers and investors taking out mortgages.

The number of mortgage registrations for first-time home buyers fell from 10,400 in the fourth quarter of last year to 4,800 in the third quarter of this year, although Wilson said the figure is the highest. most recent did not include the last three weeks of the quarter.

Investor registrations almost halved, from 6,000 to 3,100 over the same period, and the number of homeowners taking out mortgages fell from 9,800 to 4,400.

“Interest rates have had a significant impact on homebuyer and mortgage market activity,” Wilson said.

“They create an atmosphere of expectation in which many potential buyers take a secondary approach.”

Wilson said it would be interesting to see what impact any volume increases in the spring might have on sales volumes.

Agents and banks said the likely glut of properties coming onto the market would outweigh any benefit from the usual spring surge, and prices were likely to continue falling.

Wilson said some buyers are genuinely concerned about the amount of debt that could be incurred when buying a home.

“However, many buyers are able to overcome this by adopting a ‘utilitarian’ mindset, i.e. buying a house to live in and house with my family.

“Leveraging debt to access such an investment can yield significant investment benefits over a 10-year holding period.

James Wilson says borrowers should talk to their banks about their finances and may be surprised at the size of the mortgage they could pay off.

Abigail Dougherty / Stuff

James Wilson says borrowers should talk to their banks about their finances and may be surprised at the size of the mortgage they could pay off.

Wilson said existing owners may also need to carefully consider whether they can afford to move up the ladder in the current market.

“For many homeowners, the value of their properties may have increased significantly, but the same is true for other properties around them, if their incomes did not increase to the same level, they probably couldn’t not afford to “upgrade” their property.”

Singh, 30, arrived from India a decade ago to study 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 I made here, so many friends I have to leave.”

Singh said he and his wife plan to move in a few years, and while it will be painful, he needs to think about his family’s future.

“I want my kids to grow up in the same house, where they can make memories and I can make memories.”

Leave a Comment

Your email address will not be published.