The Home Loan Affordability report revealed that rising house prices combined with a small decrease in fixed mortgage rates, along with the May 20 budget and the prospect of an RBNZ rate rise soon, were all contributing factors.

The decline in affordability was most evident in Auckland and Wellington, where house prices are holding strong and the outlook for the future of the market remains positive.

Interest.co.nz said both first home buyers and investors were holding back from the market until the Federal budget was handed down and the next interest rate rise occurred.

The Reserve Bank indicated the OCR would be lifted in `mid 2010′.

Variable mortgage rates are currently at an average 5.86 per cent and remain at their lowest level in 7 years, meaning some borrowers may choose to go variable rather than fixed to improve their immediate affordability.

Source: eMocha.com

1. Organise a home loan pre-approval
An official written home loan pre-approval will give you an accurate guide as to exactly how much you can borrow, which means you can negotiate or bid at auction with confidence.

2. Consider your finances
There are serious financial considerations to take into account before committing to a home loan. Speak to a mortgage broker to ensure that you are buying within your limits, taking into account fees, charges and associated costs.

3. Budget in an interest rate rise
When determining how much you can borrow, you’ll need to take into account the possibility that interest rates may increase. The general rule is to allow for an increase of around two to three per cent. The past few years have shown that a larger margin, around five per cent, may be an even safer option.

4. Consider benefits of the property location
Is it in a desirable area? Is it close to schools, roads, shops, public transport, etc? Are there any planned developments in the area? What are the neighbours like?

If you would like any further information about finding the right property for you, talk to your local mortgage broker.