PHOTO: Broker warns ‘poor will get poorer’ if Government introduces debt-to-income caps to stop monster mortgages.
If you’re wanting to buy a home, you might need to lower your expectations about what you can afford after the Government gave the Reserve Bank the power to cap mortgages against your income.
That means the amount you’re allowed to borrow could be cut.
The aim of this is to stop homebuyers drowning in debt. Soaring house prices mean buyers are borrowing more than ever, with $24.5 billion worth of mortgages dished out in the first quarter of the year.
Monster mortgages have gone mainstream, with broker Bruce Patten saying the buyer struggle to keep up with rising house prices is real.
“Normally, they’re somewhere around six to seven times their gross annual income, as a norm,” says mortgage broker Bruce Patten.
“We’ve got young couples, not in relationships, getting together to buy.”
Now the Government is making moves to prevent buyers from getting up to their eyeballs in debt, allowing the Reserve Bank to limit how much someone can borrow based on how much they earn.
It’s yet another tool to try and cool house price growth.
“Obviously that obscene growth in house prices recently reiterates that need to do even more,” says Brad Olsen, Infometrics senior economist.
But there are concerns this will make buying impossible for low-income earners.
“You’re just going to cut so many first-home buyers out of the market,” Patten says.
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