Amount borrowed by Aucklanders is more than five times the annual income of the borrowers
It seems the booming market at the beginning of 2020 motivated first-home buyers to buy a new home as they continued to borrow more money on high debt-to-income (DTI) ratios until the COVID-19 alert level 4 lockdown in March.
The Reserve Bank of New Zealand (RBNZ)’s latest report revealed that first-home buyers in Auckland borrowed 57.5% of mortgage money on DTIs in March, which is more than five times the annual income of the borrowers. Meanwhile, first-home buyers nationwide borrowed under 40% on the same month.
According to Interest.co.nz, first-home buyers across New Zealand borrowed $1.138 billion to buy homes in March, with $455 million on a DTI ratio of more than five – a jump from over $1 billion with only $308 million on a DTI ratio of more than five in 2019.
The RBNZ report, which included information since 2017, clarified that “most of atypical borrowers are seeking bridging finance or are legal entities, such as trusts and look-through companies.”
“Our understanding is that property investors are over-represented in these special cases of very high DTI lending. These special cases make the interpretation of investor DTIs difficult in terms of serviceability risks,” the RBNZ said.
