Reserve Bank reveals threat to first home buyers from rising interest rates

Thousands of heavily-mortgaged first home buyers in Auckland could be hit hard by rising interest rates, thanks to out of control house prices, according to documents released to the Green Party under the Official Information Act.

An email from Reserve Bank analysts to senior Beehive staff in January 2017, titled “response to PM’s questions”, highlights a “significant likelihood of financial distress” for people who have recently got mortgages in Auckland, in the event interest rates rise as predicted.

“The Prime Minister is clearly worried and the Reserve Bank is clearly worried. This is what happens when the Government allows the housing market to spiral out of control,” Green Party Co-leader Metiria Turei said.

“People took on huge risks because they felt they had to buy now, because houses were only going to get more expensive under National. Now that interest rates are rising things are going to be tough for many families with mortgages.

“The Reserve Bank is saying families could be forced to ‘materially reduce consumption spending from normal levels’, which means cutting down on basics like food and paying the bills, or even sell their homes.

“Whether someone earns the minimum wage or a six figure salary, the housing crisis is now affecting people from all walks of life up and down the country.

“The Reserve Bank told the Government that an Auckland family earning $100,000 a year is potentially going to have to spend 60 to 70 percent of their income servicing the mortgage on their first home in the next year or two.

“If people have to spend 60 to 70 percent of their income servicing their mortgage, where is that money coming from? Turning the heater off this winter? Fewer school trips?

“The solution to the housing crisis is for the Government to build thousands of affordable homes, put in place a rent-to-buy programme, crack down on speculators with a capital gains tax (excluding the family home), and restrict overseas investors,” Mrs Turei said.

Latest Finance Announcements

Story

Tax the banks

Instead of creating an appeal fund and one-off lotto draw, the Labour Government could tax the billions of dollars banks have made in unearned, exc...
Read More

Story

Urgent action needed to support families

 The tools exist to help families with surging costs – and as costs continue to rise it is more urgent than ever that we use them, the Green Party ...
Read More

Story

BPS constraints risk impacting low income people the most

The Government will constrain itself unnecessarily at Budget 2023 unless it changes the tax system to raise revenue from the wealthiest few which c...
Read More

Story

Case for excess profit tax on banks clearer than ever

The Government should adopt an excess profits tax and use any revenue raised to help people make ends meet, following the rise in the Official Cash...
Read More

Story

Tax excess profits, don’t leave it to the good will of large corporations

The Green Party is once again calling on the Government to introduce an excess profits tax and use the money to support people, rather than relying...
Read More

Story

RBNZ report strengthens case for excess profit tax and more income support

A drop in household income from rising bank interest rates further demonstrates the need for an excess profits tax, the Green Party says.
Read More

Latest Building and Construction Announcements

Story

Let’s build better, warmer, and climate-friendly

The Government must take steps to ensure that the way we build our homes is helping to meet New Zealand’s climate change targets, the Green Party s...
Read More

Sustainable buildings and warm dry homes

Everyone has the right to a warm, dry home. Instead, housing in Aotearoa often makes us sick from damp and cold. In Aotearoa, much of our housing s...
Read More

Story

National would rather save landlords some cash than look after sick kids: Green Party

The National Party is more concerned about the back pocket of property investors than sick kids and the elderly, Green Party Co-leader Marama David...
Read More

Story

Stop charging homeless people for emergency housing

The Green Party is calling for the Government to stop sending homeless people into thousands of dollars of debt with the Ministry of Social Develop...
Read More

Story

Green Party: Building code out of date and won’t ensure warm, dry homes

In response to calls for a compulsory energy rating for buildings the Green Party is renewing calls for the building code to take better account of...
Read More

Story

Green Party calling for bold steps to tackle issues in Salvation Army report

The Green Party agrees with the Salvation Army that bold new steps are needed to stop a worrying trajectory of increased rent rises and homelessnes...
Read More