Before anyone gets their hopes up that these new reserve bank rules are going to help first home buyers, we need a reality check.

They’re not going to help. They just made buying a house a whole lot harder.

So the rules are a reintroduction of loan-to-value ratios. They were of course in place before Covid, but got dropped once the pandemic hit over fears that the economy would tank.

Basically, what the rules force banks to do is to make sure home buyers have a big enough deposit, or equity, in order to buy a house.

So investors will by next month need a 30 percent deposit. That’ll increase to a 40 percent deposit by May 1^st.

And owner occupiers – people who are buying the house to live in – will by next month need a 20 percent deposit.

And this is where it gets hairy for first home buyers.

This is only going to have a marginal impact on house prices. It’s definitely not enough to bring house prices down. It might slow the rate of increase a little, but with the power of a supply shortage and low interest rates, that barrelling upwards of prices is expected to continue.

But it is going to lift the barrier to being able to buy a house?

The average house price in Auckland is now $1.2 million according to QV. A 20 percent deposit for that house is $240,000. 

That’s a lot of money to save when you’re already paying record high rents. 

The truth is the Reserve Bank is not trying to help first home buyers. That’s not their job.

Their job is to ensure financial stability, so they’re actually trying to make sure first home buyers don’t overstretch themselves to get into a property and thus put our entire system at jeopardy if there are enough of them doing that.

The other truth is that this is a conversation we’re going have a lot in the coming weeks. The government is also planning to introduce its measures to quell prices, and I’d be surprised if we saying anything other than ‘house prices are going to keep rising’.