What’s going on in the World of Property and Finance Right Now? – July 2021

There has been lots of news about how the property market is going crazy.

House prices are rapidly rising, by as much as 20% in a year.

And there are mixed messages in the market with some interest rates being cut and some being pushed up.

So, what does it all mean for you?

Let’s take a look at what is currently going on in the world of finance and property…


Record Low Rates

It has long been known that New Zealand has a supply and demand issue when it comes to housing. Basically, there just aren’t enough houses available for those that need them.

ANZ has introduced a new interest rate to encourage their borrowers to build new homes. The lowest mortgage rate in New Zealand has hit the market – a 1.68% floating rate for new build homes.

“ANZ’s new build rate comes in cheaper than ASB’s “Back My Build” rate at 1.79%. Both loans are significantly cheaper than the standard variable rates available to borrowers, with Kiwibank at 3.4% and the rest of the major banks above 4.4%.

There are no plans from BNZ or Westpac to match these kinds of deals to date.

If you are considering whether building is the right option for your family, then reach out to me for a no obligation discussion on whether it will work with your current financial situation.


Rising OCR?

On the one hand, some banks are markedly lowering interest rates. But on the other, they are warning about a rise in interest rates due to a potential OCR hike come November.

“Westpac’s acting chief economist Michael Gordon said, “a string of strong activity indicators”, such as the soaring housing market, had defied restraining measures. This, he said, could lead to a tightening of monetary policy this year.

“Having just recently brought forward our forecast of the first OCR hike to August 2022, we’re now questioning whether the RBNZ has even that much time on its side. We now expect the first OCR hike to occur in November this year, with follow-ups in February and May next year, and a further gradual tightening over the following years.” [source]

So, what does this mean for you?

Well, we have already seen longer term rates begin to edge up this year. Shorter term rates could do the same. Now is the time to review your current mortgage to see if you are on the right interest rates and whether you are fixed for a correct term.

If your fixed rates are expiring within the next 7-12 months and you are worried you may end up with a higher interest rate at your review date, it may be worthwhile to let us to do some costings for you now. Then, you can make the best decision for how you want to proceed.


Are Property Prices Still On The Rise?

It is no secret that property prices have skyrocketed recently. In fact, the average property value across the country has just surpassed $900,000! [source] The national average asking price has climbed by 20.2% in a year, and to top it all off, there are 33.3% less properties on the market compared to June last year. [source]

Kiwi homes are costing nearly $150,000 more than they did this time last year [source]. But, is the market starting to cool? Or will prices continue to rise more and more?

Well, there is a small amount of evidence to say that the frenzy is starting to cool down. “CoreLogic’s House Price Index (HPI), says house prices rose by just 1.8% over June, slightly down from 2.2% in May. Research head Nick Goodall says this is evidence of a gentle drop in market momentum.

Goodall says the exceptional growth displayed during the past year was not sustainable, particularly with increased deposit requirements, market uncertainty driven by Government regulation and the prospect of higher interest rates.” [source]

If you are considering buying or selling property in the current market, the best course of action is to seek advice on your individual financial situation. That way, you will know exactly what you can afford to do and establish your risk appetite.


Fix Or Float?

With interest rates at record low levels, it has been tempting for some borrowers to float portions of their mortgage. But is now the time to consider fixing?

We have already discussed that economist are predicting an interest rate rise as early as November 2021. So, you might want to consider your options when it comes to fixing your mortgage.

We have enjoyed an extended period of low rates, but they cannot continue forever. Upward movement has already happened on longer term rates, so if you are looking for long term certainty on your mortgage costs, now is the time to look at those rates.

80% of all mortgages are currently fixed for 1 year or less. While rates are low, choosing shorter term periods is often the best strategy. “However, there is a growing risk that rates could rise faster and higher than expected, impacting borrowers following this strategy.” [source]

If you aren’t sure which strategy is best for you, then reach out to me today and we can discuss how to structure your mortgage to best suit your situation.