Warning to first home owners

Press, 16 August 1984, Page 3

Warning to first home owners

First home owners should be careful not to over-com-mit themselves financially, said the national president of the Real Estate Institute, Mr Trevor Johnston, in Christchurch yesterday. With new higher interest rates on mortgage finance, there was a danger of home owners being unable to meet their mortgage repayments, said Mr Johnston.

The market for first mortgages was still in a state of flux, and potential first home owners should “shop around” for their finance, he said. Finance companies had led the trend towards higher interest rates in the weeks after the election.

Rates offered by trustee banks, building societies, and solicitors in their efforts “to outbid each other,” ranged from 13 per cent to 17 per cent. Interest rates before the election were held at 11 per cent. Mr Johnston said that he had every sympathy for the first-home buyer, especially those on low incomes.

“There is a desperate housing shortage for those on low incomes in New Zealand,” he said.

He offered several suggestions to the Government to improve the housing situation. He cited a scheme which has applied successfully in Australia for several years and which the Government is considering whereby

people on low incomes are given an advance cash deposit of up to $7OOO to buy their first home.

Mr Johnston suggested that this proposal would be cheaper for the Government than subsidising interest rates, or that a combination of both might be appropriate.

The Housing Corporation would be “an ideal vehicle” for such a scheme, because it could lend mortgage money as well, he said. The corporation might well benefit from direct public funding, on a scheme similar to Kiwi Savings Stock, he suggested. The idea had been mooted by the former Minister of Housing, Mr Friedlander, several months ago, and it too deserved consideration, Mr Johnston said.

Big reforms were also needed in New Zealand’s stringent building by-laws. The great variation in local body interpretations added confusion and extra costs as well. “It seems unrealistic to me that most local bodies apply the same stringent by-laws to repair and alteration of an existing dwelling as they would to a totally new dwelling,” he said.

Mr Johnston said that the scarcity of fully serviced building sections in the main centres was another significant factor in the housing shortage.