Welcome to the Millionaires Club
More and more suburbs are entering the Million Dollar club. In fact, a third of Auckland's suburbs passed the million-dollar average in property values this week. However, owners are living hand-to-mouth because their mortgage takes most of their weekly incomes.
Statistics New Zealand find about 20% of Aucklanders are paying 60% of their incomes to service their mortgage. It used to be 40% — and even that was considered the upper end of affordability.
The older generation who recall servicing a mortgage with 40% of their household income did not leave much in reserve after ordinary living costs, so I only wonder what it takes to service a mortgage based on 60% of one’s income.
When the Reserve Bank lowered the official cash rate to 2.5%, the lowest it has ever been gave some relief to those on a floating mortgage. The new asset millionaires are probably safe to hold on to the house although the home is now less likely to appreciate at the rate we have seen a few months prior.
As years pass, children get older and couples realise they are not struggling as much as they were. That's when they will look at the house and know for sure they were right to buy when they did!