RBNZ data: Auckland DTIs skyrocketing

by Roxanne Libatique20 May 2021

The debt-to-income ratios (DTIs) of home buyers in Auckland continue to skyrocket, according to the Reserve Bank of New Zealand’s (RBNZ) latest data.

When taking out a mortgage, lenders ask customers a range of questions, including their other debt and income. In RBNZ’s latest DTI new commitments survey, the lenders provided the central bank with summary data of their new mortgage customers’ debt and income profile.

The latest RBNZ survey found that $424 million was loaned to Auckland borrowers at DTI greater than five in March 2021. Meanwhile, $687 million was borrowed at a loan-to-value ratio (LVR) greater than six in the same period.

By contrast, only $216 million was loaned to Auckland borrowers at a DTI greater than five in March 2020, and $275 million at a DTI greater than six.

First-home buyers (FHBs) in Auckland borrowed $552 million at a DTI greater than five in March 2021, stretching too far to climb the housing ladder. Meanwhile, FHBs across New Zealand borrowed $549 million at a DTI greater than five in the same month, compared to $290 million in March 2020.

RBNZ explained that DTI can help assess housing affordability, which can be viewed from several perspectives:

  • Affordability for renters;
  • Affordability for prospective home buyers; and
  • Affordability for recent home buyers.

“The DTI survey is more suitable as a tool for assessing recent home buyer affordability because it measures actual mortgage lending flows. DTI survey data informs the ‘residual income’ measure of affordability. This method draws on a range of data to estimate the income left for a household’s other expenses after meeting their mortgage obligations,” RBNZ said.

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