Will homeowners go under?

PHOTO: CHARLOTTE CURD/STUFFNew Zealanders are better positioned for house price wobbles than they were in the global financial crisis.

Loan-to-value restrictions that made it harder for people to take out home loans with small deposits should protect homeowners from falling into negative equity.

“Negative equity” refers to owing more money on a property than it is worth.

It becomes more of a risk in markets where house prices are falling and people have taken out large mortgages to buy in.

NZ’s housing risk

In February, first-home buyers took out $938 million in new loans and $371m of that was to people who had less than 20 per cent equity in their new properties.

There are predictions that house prices could fall as much as 10 per cent in the economic disruption caused by Covid-19, which could erode much of that.