Labour’s tax and spend mean big interest – Key

Spending more than half your salary on the home mortgage was ‘‘reality’’, according to Prime Minister John Key, but he predicted interest rates under a Labour-led government would make it even worse.

He went on the offensive again over Labour’s capital gains and said it was ‘‘stupid policy’’ that would drive interest rates up.

‘‘All of these big spending promises, in our view, would lead to higher interest rates and that’s a really big factor for those home buyers with home mortgages to think about,’’ he said.

He was in Hamilton to open the Dairy Goat Co-operative milk drying plant and Wintec’s new engineering and trades building and said the local economy was doing well.

But in Auckland where the property market was soaring, first-home buyers were borrowing as much as they could and committing 50 per cent of their incomes to the mortgage.

‘‘It’s reality in some of our big metropolitan cities like Auckland,’’ he said. ‘‘As first-home buyers move into the market, they typically have high mortgages.’’

It was nothing new, he said, for buyers to push themselves to the limits of their income to climb the property ladder.

‘‘Most of us, when we think back to when we bought our first home, the reality is you always think you pay too much, borrow too much and it feels like a stretch.’’

Young people just starting out in the workforce would feel the bite of monthly mortgage payments but that would ease over time as debt reduced and incomes climbed.

‘‘There is often a situation where their earning capacity is actually rising,’’ he said.

Penny-pinching was normal with mortgage holders preferring to stay in rather than splashing out on holidays or a night-out.

‘‘It’s a sacrifice that a lot of individuals and couples rightfully want to make because their home is very important to them.’’