Century 21 New Zealand
Thursday, 11 August 2016
Low interest rates will mean busy spring
“It’s yet to be seen just how much of the latest Official Cash Rate cut will be passed on by our retail banks.
Regardless, we’re expecting a strong spring and summer with low interest rates now further cemented enabling more people
into the market,” says Geoff Barnett, National Manager of Century 21 New Zealand.
The comments from the real estate boss follow the Reserve Bank cutting the Official Cash Rate today by 25 basis points
to a record low 2.00 percent.
“With many people already able to lock in a mortgage rate around 4%, many renters are discovering they’re now better off
buying - if they can first cobble together a deposit. At the same time, the likes of retirees are increasingly
contemplating trading in their low-yielding term deposits for an investment property.
“As well as pretty tough deposit rules these days, banks are really scrutinising people’s ability to service mortgage
debt long-term. The Reserve Bank’s latest cut can only help get more young couples and singles over the ‘mortgage
approval’ line.”
Mr Barnett says falling interest rates help mitigate house price increases and mortgage calculators on banks’ websites
will be working hard. He says many Kiwis sick of soaring rents will be saying ‘maybe we could service a mortgage now,
and maybe we should’.
“Home ownership remains a dream for many people, and falling interest rates always help make it a reality for more
people,” says Mr Barnett.
He believes the recent LVR (loan-to-value restrictions) changes that officially come into effect on 1 September will
make little difference on the demand side of the real estate market. However, there’s one factor that could help supply
by encouraging more construction.
“Last month we learned that loans for first home buyers who buy off the plans or construct a new dwelling will continue
to be exempt from the nationwide 20% deposit requirement. When you now also factor in very low interest rates, my
prediction is that we’ll see more first home buyers opting for a new build if they can get a deposit together. For many
it will be their best and only option to get started.
“People should not wait and wonder whether the Reserve Bank will cut the OCR again in the coming months. There’s no
guarantee that will happen nor is there any guarantee the banks will pass on such cuts, as we have seen across the
Tasman where banks only passed on a small portion of their latest rate cut.
“It’s going to be a strong spring for real estate regardless fuelled by already low interest rates which are now
arguably close to, if not, rock-bottom,” says Mr Barnett.
ENDS