This – here is a recent Market Commentary on home loan rates, this one from ASB.
In Summary, the Reserve Bank lowered the OCR in Sept/Oct 2019 by a surprising 0.5% at the time and this, plus further lowering of the OCR signalled since by the RB to likely negative wholesale interest rates within NZ has sharply lowered retail borrowing rates for customers of banks. These are the lowest rates in over 80 years in NZ and combined with the removal of the LVR policy, has meant an improved environment for borrowers. This has spurred on property buyers, both first home buyers and more recently investors and property prices have been rising due to this pent up demand.
Due to a 13 year low in property listings, sales volumes have not risen across NZ. But clearly, house prices have not dropped at all like was predicted when Covid 19 first hit.
The RB has also been buying bonds and printing money (termed QE) to intervene in the economy and assist in driving interest rates down as well.
It is a widely held view that rates will remain low for up to 5 years and may go a bit lower yet before slowly trending up in the 2-5 year period. This still might be below 4% pa in 5 years so a once in a generation opportunity to buy property.
There remains confusion in the market especially for first home buyers about what is the best mortgage type to suit them. Below is a summary from ANZ, one of NZ’s largest lenders of the differences between loan types, fixed, floating and revolving credit facilities.
Everyone has different circumstances but the flexibility and low rates in place now mean most people can find a structure that works for them.
And lastly, what does the future hold for property prices in NZ? Will the doom and gloom merchants be right about recession and unemployment negatively affecting prices?
I leave you with this quote last week form Tony Alexander, one fo NZ’s most respected bank economists – “House process tipped to rise at a completely unforecastable pace” – So, it sounds like Tony feels the time to BUY IS NOW, before 2021 when the effects of Covid are hopefully past us and the lower interest rates (expected to be below 2%) may drive HUGE demand with still low supply. Prices may well skyrocket next year!