End of the free market for mortgages
It seemed bold - or crazy - when it started. But after less than 14 years, New Zealand's experiment with leaving home lending almost entirely to the free market is about to end.
Wednesday, March 9th 2005, 6:15AM
by The Landlord
Jim Bolger's National Government put the state-owned Housing Corporation on a commercial basis in July 1991. All its mortgages to first-home buyers, which had been below market interest rates since 1906, were to be moved to full market rates and sold.A year later, the first third of the corporation's mortgages were sold for around $1 billion. The rest followed over the next six years.
Private lenders filled the gap with gusto. Apparently limitless credit fuelled a rise in the prices of low-end houses in Auckland from 3.4 times the income of a typical low-income working family in 1991 to 5.1 times the typical low income a decade later.
But as prices soared, the proportion of homes owned by the people who live in them, once the highest in the world, dropped from 73.8 per cent in 1991 to 68 per cent.
Now Prime Minister Helen Clark has signalled that the free-market experiment is over. Already Kiwibank - ironically, chaired by Bolger - has made 750 loans totalling $87 million under a pilot state-backed mortgage insurance scheme to help low-income people into homes. More is promised in the Budget on May 19.
Read More - Opens in a new window
| « Property investors refocus on cash flow | Free Investment Property Showcase Events: Auckland, Wellington and Christchurch » |
Special Offers
Commenting is closed
|
|
Printable version |
|
Email to a friend |
