Interest money

Answers to your money questions: Will the budget give me a chance to buy a house?

Susan Edmunds is Stuff’s business editor. Each week, she will answer your money and personal finance questions. You can send yours to [email protected] This information does not constitute personal financial advice and should not replace professional advice.

My boys are both in their early twenties and just climbing the bottom of the career/employment ladder…what do they get out of the budget? Could they one day afford to buy a house – they think it’s an impossible dream?

It’s really hard to start your professional life in times of economic turmoil… I hadn’t been in the job market for a long time when the Global Financial Crisis (GFC) hit.

As for the content of the youth budget, there are several ways to look at it. If they work and earn less than $70,000, your sons will likely qualify for the $350 payment, divided into three monthly installments. This is designed to help people cope with the rising cost of living.

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As for the dream of home ownership, there are a few things that might give them hope.

One if this Treasury predicted that house prices would fall in real terms by 17.8% over four and a half years, between December 2021 and June 2026, or about 12% more than before the Covid-19 pandemic.

If wages are rising solidly during this period, it could mean that home ownership isn’t as daunting as it might be now.

Then there are other benefits that have been announced.

The budget paved the way for more people to access first home grants and <a class=loans.” style=”width:100%;display:inline-block”/>

ROBERT KITCHIN/Stuff

The budget paved the way for more people to access first home grants and loans.

The government has lifted house price caps for first-time home subsidies in many parts of the country. This grant is $5,000 per buyer for people using their KiwiSaver money to buy a home, or $10,000 if buying new construction.

It also removed caps on first-time home loans entirely – these allow buyers to get a loan with a 5% down payment.

The catch is that income limits remain — you must earn less than $95,000 as a single person or $150,000 as a couple to qualify.

The government also now allows relocatable homes that have received a code of compliance certificate within the last 12 months to qualify as new properties (thus a higher grant amount and a higher price cap for this grant) .

It will also allow members of rent-to-own programs to access the new construction grant.

It’s not a magic bullet, but hopefully some of these factors combined will help your sons have hope. I urge them to contribute as much as possible to their KiwiSavers early in their career to put them in a good position to buy later.

I don’t understand how/why OCR affects interest rates…why does it slow down inflation, and why does war/pandemic make inflation worse…or is it better … how is inflation corrected? Doesn’t having high interest rates make it harder for people to buy things, so how does that solve inflation and make things better?

The official exchange rate is an important factor in how banks set retail rates, especially shorter fixed terms.

They get their money from various places, but the OCR is the rate at which they borrow short-term from the Reserve Bank, so it sets a kind of floor.

Very generally, yes, yes, having higher interest rates means it’s harder for people to buy things, which slows us all down in our spending and means people selling things don’t have not the same ability to raise prices – so inflation should come down.

The war and the pandemic have made inflation worse because they have blocked the supply chain, which means it costs more to get things here, or there is competition for available resources , driving up prices…and so on.

When the Reserve Bank wants us all to spend money and help the economy, it cuts rates to give us (and businesses) more discretionary cash. When he wants us to calm down, he raises the prices. At the moment, we are in “calm” mode.