The next OCR review is on February 19, 2025, about five+ weeks away.
Financial markets are pricing in a -50 bps rate cut then, which would take the Official Cash Rate (OCR) down to 3.75%.
If that in fact happens, almost certainly, floating mortgage rates will fall then by a similar amount. And that would take them back to about 6.9%.
But what will fixed rates do? Short term mortgage rates like the 6 month fixed will likely fall too. Maybe not the whole -50 bps, but much of it. But it is much less certain that other fixed rates would fall by anything like a -50 bps OCR cut.
Mortgage brokers are out talking their book, raising expectations of big rate cuts ahead for borrowers. But mortgage brokers are hopelessly conflicted here. New mortgage transaction flows are weak because the housing market is weak. Their business model is being shunted into the refinance activity. The way they can keep their fee flows up is to have borrowers make more transaction activity, to fix shorter and more often.
But away from their noise, what are the chances one year or 18 month home loan rates will fall sharply too?
Actually no-one really knows (and anyone who says they do should be treated with scepticism).
But we can read some tea leaves related to the pressure on money markets and bank funding costs - because it is these realities that will give banks the room to move and respond to any competitive pressures.
First, we can look at how the wholesale swap rate market has reacted since the last -50 bps OCR cut on November 27, 2024, taking it down to 4.25%. At that time, the one year swap rate was 3.82%. Today that same rate is 3.53%. So it is only pricing in a -29 bps change. If that held, these wholesale markets are suggesting a -25 bps change is the most banks could 'afford'. There are still five weeks to go, but by now you might have thought the OCR signals would have driven more of a swap market change.
And the reason the swap change is limited probably has a lot to do with the new upward direction at the long end of the rate curve. That is an international trend. Long term money is getting more expensive.
Banks fund their operations from local and international sources, so the international pressures are real for them. However, most of their funding is from domestic customer deposits. And New Zealand customers like to keep their deposit terms short, in fact very short.
But banks lend long, mainly for mortgages.
So bank treasurers who have to manage this mismatch need to get their long term funding from sources that will supply that. And they are mostly overseas. And long term yields and funding costs are rising there, so they won't be lending to our banks at lower rates than they can get elsewhere. In fact, they will probably need a premium to lend to 'New Zealand'. None of this argues for lower rates ...
... unless you believe banks will force their depositors to accept less, in the same proportion that the OCR might fall.
But banks are constrained by regulation. It's a simplification, yes, but it is true enough; the Core Funding Ratio limits how much bank funding can shift away from local depositors. Banks need that depositor funding base and can ill-afford to have any meaningful leakage of depositor support.
Furthermore, an increasing share of depositor funding is coming from term deposits, the expensive end of this source.
So, the depositor funding is shifting to the higher-cost term deposit category. And the wholesale funding banks must raise to bridge the gap between their lending book and their depositor funding will largely come from offshore for the longer term tenors, which are also rising in cost.
None of this argues for big cuts available for lower fixed home loan rates. Competition for market share might allow some small -10 or -20 bps home loan rate cuts. But banks would have to reject their shareholder return expectations to go more than that even with a -50 bps OCR cut. What do you think are the chances of that? Maybe Kiwibank, who has a shareholder who until now has not wanted market returns, might be a candidate. But with the recent expectation on the Kiwibank board to raise capital in "the market", it seems unlikely they will have the funding or tolerance for low returns. New market pressures are about to influence Kiwibank, even requiring them to start earning overall returns "like the others".
It is hard to envisage a 2025 where fixed home loan rates can fall much further than say the low 5% level. Long rates are probably going up on the Trump Effect. Short rates probably can't follow the OCR down.
Of course time will tell. We are not making any predictions, only reading the tea leaves as they swirl in January.
Yes, you may have home loan rate decisions to make. Your guess though will be as good as anyone else's - and probably better than that mortgage broker who says for certain they know what is going on. (They may be registered with the FMA, but interest rate forecasting skill is not a factor in that registration.) There are two types on mortgage brokers - 'hunters' and 'farmers'. Their compensation isn't regulated in the same way banks employees are restrained, so while that dodgy bank 'recommendation' behaviour (tied to their pay) has been regulated away, it has just moved over to mortgage brokers. Buyer beware. The confliction is real.
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look overseas as mortgage rates aren't declining at all and now that your term deposits will be insured from other institutions by mid year I doubt the banks will offer substantial cuts in term deposit rates as now there will be more competition so I see less rate cuts coming for 2025 maybe a small increase, which should lead for more house price declines.
Not just "not declining" but going back up. US mortgage rates are back at June 2024 levels (7%) despite three Fed rate cuts since then.
https://finance.yahoo.com/news/mortgage-rates-jump-again-approaching-7-…
Mortgage "advisors" -brokers, are the used car like/finance industry slimey salesman, that look to hook the NZ Ponzi Debt Junkies into forever bigger DDDEBT.
- Some First Home buyers think these MAs are their friends, they are simply not paying attention.
These brokers see gumby FHBs especially, as useful idiots who are just they donkey/mules, to enable their fat commissions.......
It's very much buyer beware, as the above author espouses.
Mortgage brokers, like other REA industry miscreants, seek to nefariously "Coach and Cajole" the novice first home buyers into as much debt as they can handle on a "fine day" in economic terms. Up past their eyeballs in many cases.
MANY FHBs now, have been caught out in the current property crash and some have had to ditch property at massive losses from their 2019 to 2022 purchase prices, such as is occurring, in this currently unfolding property crash.
When these poor debt loaded sops, hit these economicly stormy rocks, the previous Mortgage advisers / brokers could not care less and is gone, like a fart in the wind.
Any interest rate, "first aid bandage" to stem the NZ housing ponzi gaping wound, home equity blood loss, would need mortgages written with a 3% handle, otherwise further house price declines are baked in the cake for 2025/2026.
Buyers beware and only make offers in the 2015 to 2018 value range.
REAs and Mortgage brokers won't advise this, but as we all know, they are hopelessly conflicted.
Sure Mr Painter, whatever successfully refloats your Ponzi-Deep addicted boat:)
BTW - Are you scoping to become an REA or mortgage broker? if your current gig does not pan out?
The WORLD is now fully HFL for interest rates. Little, skinny kid NZ, cannot be duffrant.
- Its Buyer Beware, at every turn.
There's a potentiality for rates to stay high given the relatively small movements in unemployment and weak economic growth. With the buffer remaining until if/when there's a larger crisis to stimulate an economy through.
If it really were heading towards higher rates than now for a protracted period, silly notions about buying a house for *insert year* prices are somewhat irrelevant.
My gigs are looking pretty good thanks. I keep waiting for the sky to fall, in the meantime actual demand only seems to increase, and I'm trying to use the surplus wisely.
Maybe if I thought in capital letters more my disposition would be less sunny.
Glad your current gig is holding up, in these tougher economic times.
My current main gig (very recession resistant btw) has seen significant falling sales, during later 2024.
This is a real world harbinger for me. If I'm feeling this recession directly, mostly everyone else must be crapping hard bricks!
Anyway crisis and tough times create opportunity for those with access to capital.....
Everyone is going to feel it in different ways.
If a business (or household) has a high cost model, even smaller single digit declines in profits can be severely felt.
Best to aim for an austere financial life, but earn as if you're playing a similar game to most everyone else.
Hey K,
I am not in any of these scullerious FIRE industries. How do they manage to sleep at nights?
They stitched many up with far too much Debt....some of them loans are now unpayable, rely on the bank's limited forbearances to get by.....
Glad you found the odd diamond, amongst the roughies.
Great article, David. Mortgage rates seem to have limited downside potential, even with another OCR cut. I'll be keeping an eye on the short end of the yield curve. In the US and UK, the short end is climbing higher, with the 10-year yield only about 30 basis points above the 2-year. Meanwhile, the NZ 2-year yield is 90bps lower than the NZ 10-year. Are markets pricing in another rate cut? If a cut doesn’t happen, could we expect the 2-year yield to move higher? I’m curious to understand why our spread is larger compared to the US (~30bps), UK (~30bps), Canada (~40bps), and Australia (~60bps).
Perhaps the way the market is viewing it is that the recession is going to be worse here in the short term (ie our economic position is much weaker) - requiring lower short term rates than the other countries mentioned. Or it could be a mystery of finance that we will never know the answer to.
Where is the extra return to come from?....increased Government spending?....not looking likely in the current environment. Perhaps it will come from private investment in infrastructure?....that will take time and require an increase in incomes. Maybe we will pay less offshore for our inputs?....everyone else will be hoping the same.
Options are disappearing.
I have already asked myself that question ... many times.
The answer is either a) smart people holding for a short time until they invest for better gains, or b) dumb people who don't know where the better gains are.
(And in case you were wondering, holding off for more NZ housing prices falls is idiotic. You'd be better off investing offshore, even through a NZ domiciled fund.)
c) People that have already made it past the "Finish" line early that are now mortgage free and want to semi-retire early and are not greedy trying to make more money than they actually need and are happy to cruise through to 65. Probably very few of them on here but thumbs up if that's you.
c) People that have already made it past the "Finish" line early that are now mortgage free and want to semi-retire early and are not greedy trying to make more money than they actually need and are happy to cruise through to 65. Probably very few of them on here but thumbs up if that's you.
There's definitely a ceiling to how much someone needs to be moderately comfortable. So the bits and bobs more you might afford if you devoted more energy to capitalism, potentially aren't worth the effort.
Someone smarter than me once said "a meal is as good as a feast", generally rings pretty true.
An ill-informed nonsense statement typical of those that fall into category 'b".
I can convert my shares into cash far, far faster, and in any amount I want, in a day or two. Can you do the same with a TD without getting stung?
Further, the equity I have in my modest property portfolio facilitates large overdrafts that can be drawn on at a moment's notice.
Thanks Zwifter, for proving my point. And thanks to 16 people that gave them a thumbs up to reinforce my point.
CONF
Your comments are yet again utter rubbish.
On another thread you slagged-off a poster for “being unqualified for offering financial advice.”
Here you are in full swing doing exactly that; You would be better off to invest offshore, holding off for further house price falls is idiotic.
Your inconsistent comment yet again show that both you and your comments have absolutely no credibility.
Well to be honest HM, as apparently I'm "Unqualified" to give financial advice on here a few people here might chip in as to what "qualifications" you actually need to be able to offer it. P.S. It's going to be pretty quiet on here if we are waiting for Warren Buffett to show up.
HM
I have noticed that you lifted your game after being challenged when making numerous wild and erroneous statements.
I will continue to call out CONFs numerous factually incorrect and inconsistent comments, unless of course you are arguing that such comments are acceptable and should go unchallenged.
Sadly, over thirteen years I have seen the standard of quite a number of commentators and comments has deteriorated considerably. Hopefully the change coming in March will see some improvement.
[fragment removed. Not necessary Ed]
Cheers
So your personal future can only be bounded by your living memory...
Maybe this cycle the fed holds or hikes while the rest of the world cuts....
Remember we only cut USD off gold in 1970s, plenty of time to see the US try to weaponize the USD yet, if china wants to play that game, let them bring it on.
No Orr doesn't really, the banks are looking out for themselves and if Orr try's to lead them off a cliff they are not going to follow. I don't see the banks performing any more big cuts anytime soon unless things get incredibly dire. Maybe they will trim the floating and short term fixed rates but they are not going to set themselves up for those really low 5 year fixed terms again that every man and his dog will go for this time around.
The Fed’s only bringing back QE if there’s another crisis. Right now, the US looks strong, but if the stock market crashes, will they step in to save the day? Who knows. In the meantime, the US will pressure us with their strong dollar and high bond yields, the same forces that are also putting downward pressure on US equities.
The amount of QE required to bring the long end down would push the US, UK, and Europe closer to resembling Japan. With the long end rising 100bps since the Fed's cuts in September, the market is signalling that inflation remains a problem. Is QE even an option anymore in an inflationary environment? It might just trigger a final race to the bottom.
"Orr will need to cut below 3% for mortgage rates to go much lower than 5%. "
What would you think would be the reason for that?
I only ask as when I fixed for 3 years at 4.99% on 21st April 2022 (I broke early as I saw the increases coming). At that time the 3 year swap rate was 3.73% and on it's way up. Which indicates a margin of around 1.26%ish. Margins right now seem much bigger with current 3 year rate 5.59% at my bank and with 3 year swap rate currently lower at 3.5%, which implies a margin of 2.09%.
Zwifter - At present the uncertain global economic chaos clouds the future direction but I reckon Trumps policies if effected will result in inflation and limit interest rate reductions but then will increaseed costs and inflation stop the western worlds debt driven consumers to stop buying? In this event Bankruptcies and Insolvencies with high unemployment and lower tax revenue result in more credit/mortgage defaults and Bank credit write offs spiralling. If this happens and we see a deep recession of depression and deflation as in China Banks/Govts may be forced to reduce interest rates to stem the losses as a better policy than the cost and social disruption that follows. The world is changing and as yet NZ seems unaware of the causes and effects but when the effects arrive it will be too late for many. Centrix reports 468,000 active NZ credit accounts in arrears - is this a leading indicator ?
I always find the idea of deposits funding loans a bit weird - the deposits are a liability on the banks balance sheets, the loan agreements are the assets. New loans literally create the deposits, which apparently fund the banks?!? But, I have been told it's just a language thing, and economists like to describe the world in reverse terms to keep the workings a mystery, so to the point...
I have banged on previously about how painfully slow the mortgage rate adjustments will be through 2025. Banks will manage the effective mortgage rate down very slowly to maintain net interest margins. After the GFC, the OCR was dropped from 8.25 to 2.5 (mid-2009) and it was more than three years later that the effective (weighted average) mortgage rate dropped below 6%. If you compare the standard offer one-year rate to the OCR over time, you can also see this clearly. We've never had a standard offer one-year fixed rate mortgage below 5% while the OCR has been above 2.5%. Sorry.
Actually, I shouldn't be glib - thie is a really important consideration for the 'low rates will save the economy' crowd. The OCR started its descent in mid-August 2024 but the effective mortgage rate carried on going *up* for the next two months. We will find out next week whether the increase continued into November 2024.
All the signs are that the effective mortgage rate will stay in the low to mid 6s for the foreseeable future and that 1-year fixes will edge down frustratingly slowly (as David outlines above). That means that in aggregate interest payable on mortgages will stay well above $22bn per year for a good while yet (more if we borrow more). That's $10bn higher than two years ago. This effective transfer of money from spenders to savers and bank equity holders (in broadly equal measure) has tanked the economy and reduced aggregate demand (and jtherefore jobs etc). People can talk about the wealth effect and good vibes, but I prefer to look at the hard cash flows... and it is not looking pretty. Remember $22bn is about 1/7th of total NZ wages.
re last paragraph ... Here's an idea (well, spit-balling really) ...
What say a new bank enters the mortgage market tying a floating mortgage rate fixed at 1.5%-2.0% above the OCR while guaranteed by the RBNZ and NZ Government? As the OCR fell, the retail, profit driven, overseas-owned banks would have to compete when OCR rates came down ... Or die.
Tracker mortgages like that are pretty standard in other countries. If you have 40% equity you can pick up a tracker mortgage right now in the UK for about 25pts above the Bank of England base interest rate (you just have to re-fix two years later to avoid slipping onto the non-discounted rate). That would be 4.5% floating here - with any further OCR reductions being passed on! We get properly ripped off.
My general view is that the problem is RBNZ aggression (boom/bust), RBNZ bank capital requirements, and the high return on equity that is extracted by parent banks. If banks have to hold about 10% of deposits as equity, then they need around $60bn of equity (noting that are high level of bank deposits is a function of NZ having high levels of outstanding debt cos loans creates deposits). The typical 13% yield on that equity is $7.8bn, so NZ banks have to make $10bn a year in profits before tax to pay their parent banks. The more NZ private debt increases, the more deposits increase, and the more equity banks need (so the more profits they make).
I would nationalise the banks in a heartbeat obviously, but in the absence of that we could explore the gradual introduction of a requirement for banks to have domestically-owned equity (hello NZ Super, ACC Fund etc). RBNZ and Govt could also have a proper look at how the deposit insurance scheme and other policy changes could be used to reduce bank equity requirements - so that banks would not have to maintain such a high net interest margin to pay their equity holders.
Or we could introduce a progressive tax scheme for corporate taxation .... [evil grin]
I mean, if it is 'fair and reasonable' for highly paid people to pay more tax on their earnings, then surely it is 'fair and reasonable' for huge NZ companies to do the same? [another evil grin]
And let get honest here, the banks are profiting off everything our taxes pay for !!! [grin while sharpening my guillotine blades]
[black humor]
[more serious comment]
re ... "I would nationalise the banks in a heartbeat obviously" ... No need to.
We just need to adjust the rules (bit by bit) so they have to work far harder, and smarter, for their ROE.
To be frank, the banks consider their 'revenues' akin to tax, i.e. people will just pay it ... while almost never questioning the value, as so many so often do, about the taxes they pay.
Given our propensity for 2 year fixes (and less) would it be reasonable to expect the effective rate to show some considerable decline by early/mid 2026? If so, what chance the RBNZ would attempt to hurry things up with further cuts to the OCR (and therefore floating rates) with the expectation that other CBs will be doing the same and cross their fingers re exchange rates?
Who knows? At the moment, the US markets are predicting a terminal Fed rate (bottom of easing phase) of 4% - compared to about 2.7% last month! That change is why the yield curve has steepened (one for the fools that think the market drives the Fed). If the Fed did stay up around 4%, I cannot see RBNZ going that much below that. But, as I said, who knows?
The current difference between the ANZ app for 1yr (5.69%) vs their standard advertised 1yr rate (6.39%) is 0.7%. So looking at your graph, you would need an OCR near 3% to get the app rate to drop below 5%.
I'm starting to feel like the 5.49% for two years is a pretty good deal
Sadly, the decline in term deposit rates will only drive people into riskier investments, such as the "10% return guaranteed" offered by all the property developers to people scrolling on Facebook. In fact, I'm already seeing it.
Dont hold your breath for the FMA to step in and stop it, as we've seen, they havent bothered to act until its time for a dawn police raid.
"And the reason the swap change is limited probably has a lot to do with the new upward direction at the long end of the rate curve. That is an international trend. Long term money is getting more expensive."
Many involved in the pensions industry will tell you this is because the pensions companies are going shorter to cater for boomers cashing out of their pension funds. Where will boomers put that money? ;-)
Good read, David. Thanks.
Boomers leaving western pension funds and redistributing their wealth and climate change costs excepted, I don't see anything much that suggests "this time, it's different".
My overall view is that we'll see rates move exactly the same as the last cycles with banks, as they always do, indulging in rocket and feather pricing, and using longer term rates as a way to 'market' shorter term rates higher than they should be.
And, of course, there's always the chance that central banks are indulging in the time honored practice of 'holding too high, for too long' so we get hammered by a global recession that statistically follow periods of rate inversions. A decent recession can see large amounts of money get destroyed. Central banks & governments typically respond by creating new money to replace it ... with interest rates falling hard to get that new money into circulation.
Lots to look forward too, ay? :-)
EDIT: If you are pondering what I've said, here is an interest.co.nz graph that, when combined with a reasonable understanding of NZ's economic cycles over the last 20+ years, will assist in that pondering: https://www.interest.co.nz/charts/interest-rates/fixed-mortgage-rates
Chris -hard to argue against the historical relationship and history does repeat. If there's been an historical case of a massive asset price bubble followed by an economic recession/depression then that may give an indication of whats is in store. The political turmoil and economic chaos clouds the road and the time Gap between cause (higher motge rates) and the effects (less discretionery disposable income) will hit in 2025 and to quote the Donald - all hell will let loose and some are going to get burnedan dnot just in California.
Seems to me that the mortgage and personal loans industry may have bitten off more than it can chew, Im guessing their solution will be to widen the margin even more and pray for a house price miracle . The Idea that a low OCR will stampede the market into life lacks merit with unemployment rising and growth in the sewer. Good luck thinking TD holders will carry the can with Gold/USD tracking as it is.... Keep in mind if the NZD keeps tracking down....inflation will be everywhere.... How long before banks start to figure out they may be a tad more exposed to RE than they would like to be particularly if global events weigh down heavy on the local scene ? Those touting a 3% OCR might find reality paints a very different picture.
Rates will come down, perhaps not as quickly as people want. The banks need to lend enough out to make a profit and until consumer confidence returns there will not be enough new customers at current rates. The economy is in the shit still so if mortgage rates don't drop now we will simply see more OCR cuts and rates will drop then.
The banks could just bump the rate and squeeze their clients for YOY growth.... With a mortgage book like many are carrying presently its probably more logical to squeeze the status quo than underwrite risky lending during a period of uncertainty. I would be wanting too see better employment figures before I started throwing cheap money at all and sundry. Lets see how far the RB bows to the whims of FIRE this time around , 'Rockstar2 ' anyone....lol
So far this decade, we've had:
- a pandemic
- war in Europe, involving a large oil producer. Attacks on their refinery and storage infrastructure, pipes blown up or shut off
- shit getting real in the Middle East
- big time inflation
Yet oil is the same price today as it was 10 years ago.
Thank you David for this article, exactly why I come to this site to learn. Could you or Jfoe answer the following. What is the actual cost to a bank borrowing offshore, long for the 2/3 year mortgages? There must be fees in setup such borrowing, exchange rate, options to protect cost rises if our exchange rate changes etc. I do not have a mortgage but family all do, so these and housing issues are a hot button issue. I also do not have any TDs with the big four. But there seems go me that there is an increasing amount being borrowed outside of the registered bank. Is that true? What are your thoughts on their growth?
I can't answer your question in full. Perhaps others know what you need. But I can remind readers that when a bank borrows, it can be onshore in NZD, or offshore in foreign currency. Obviously if they borrow locally, they will be paying local interest rates. You can see what they pay for their local listed borrowing here. (They pay what it was originally issued at, not the "yield to maturity". The issue price will be a function of the coupon rate.)
If they borrow offshore, it will almost always be in USD. They would pay USD interest rates. Then they need to convert back to NZD to use it here. That process (a currency swap) uses the interest rate differentials to price it in NZD. Essentially, they end up borrowing at a rate close to local rates. The benefit for borrowing in offshore markets is that they can source long term funding that may not be available here. The one thing that doesn't happen is that the cost 'here' is the interest rate 'there'. So no-one can borrow in Japan at 2% and lend here at 6%. Never happens because you need those funds in NZD to lend, and the swap process draws in NZD interest rates. No bank ever goes unhedged. (Would be a very fast way to go broke. Unless you re-lend here in the foreign currency. But then the client should hedge, wiping out the advantage. You may recall some farmers tried borrowing foreign currency unhedged a few years ago. They all came horribly unstuck and tried to blame others for their naivety. Was a huge rookie mistake.)
Thank you David.
My take is that banks borrow offshore for the reasons of 'time' not 'cost'.
Yes, I remember some farmers being in that unhedged issue. Hard to be sympathetic really.
My reflection on all of this is that interest rates are not going to drop fast. Perhaps that is just as well, if they did, our exchange rate will drop too!
Do you see in your data increase in rural lending in eg livestock, but outside the big four banks?
Because I believe retail interest rates will come down for short terms in NZ. The NZ economy is in a vary bad state, if retail interest rates won't come down, as DC suggests, the RBNZ will be forced to cut the OCR more aggressively, (and the NZD will come to depreciate). Either way, retail interest rates at the short end will be lower. Let's revisit this post in August.
But he does say they are likely to come down. Just not nearly as much as the OCR will. I agree with him. Yet I also think the OCR will drop further than the bank economists think, to 2.5%. So probably 6 month fixed rates around 4.8-4.9% this year, and 12 months around 5.0-5.2%
NZ needs a fierce hand when it comes to corporations as a factor in our favour when it comes to handling inflation. Countires like the US and to a lesser extent AUS can get away with being more ineffectual.
We need to be pulling every advantage lever we have. The lowest hanging fruit being hammering anti competitive behaviour, often from Aussie owned businesses.
Historically interest rates are low. But NZ is addicated to debt, and NZs economy/housing market relies on low interest rates to get house prices rising again, to help house owners feel rich again. But never mind about the younger generations who will end up paying for this unsustainable model.
100% right Wi. Debt Junkies is the NZ way.
Sadly so and NZs currently lacerated archillies heal.
It's not going well in NZs current economy and the recent flood of 2nd and 3rd immigrants is papering over NZs increasingly fractured economic cracks. Cheap window dressing, while the internals emaciate further........
Very sadly, the REAs, Oneroof spoofs, Mortgage brokering, legal and banking industries are all feverishly working in cohoots to coral and line up and load in the gumby and novice First Home Buyers, as the first meat wave assault and human demining troops, who have often fallen prey to the Big debt mines, increased cost of living, economically deadly, artillery, tube mortors and drone strikes. Then, when these shell shocked, surviving expendables think they made it........ they meet the entrenched machine gun fire of higher international interest rates, that are comming over yonder hills.
FHBs should use extreme caution and go for -15 to -25% discounts off today's home asking prices, to avoid the real continued spectre of negative equity and not get economically strangled in the pending increases in local interest rates.
Or walk.
Don't be the "usefull idiot" funder, of the last hurrah, knees up, at the local lavish Rymans or Metlifcare lifestyle village.......
Buyer Beware and avoid the perils of the REA INDUSTRIAL DEBT DRUG PUSHERS, hangman's noose.
Positively now, many are awaking to the death throws of the "forever bigger debt model", that broke irrepairably in 2021.
I very good sea change has begun.
Higher cost of money and raging inflaton is seeing to it
Much to the chagrin of the Slick Willys REAs and their industrial cabal of nefarious cronies.
15 to 25% lower than asking????
Good luck there doing that!
Agents worth their money they are being paid, will not be insulting their vendors and losing their trust!!!
If you are going to be playing those games as a first home buyer then You will never be owning a home, unless you found a vendor who is desperate to sell and doesn't care about receiving fair value.
Christchurch market has started off well and plenty of people already looking and buying.
A house is worth what someone is willing to offer and a vendor is willing to accept, there is no other definition more valid. People can offer what they choose, and vendors can hold out as long as they wish, however if the offers aren't coming, or are all lower than expectations ten vendors will need to adjust or they will not get a sale. REA's can bleat as much as they wish, but they aren't offering the money, only trying to weasel information from potential buyers and motivations, in order to get a higher offer to the vendor. REA's while some may be seen to be good, are simply transactory. A means to an end with a vested agenda to profit from the extraction of information and pushing of sales.
The general rule is recessions drive interest rates lower. So, be careful what you wish for. NZ is on the cusp of falling into recession. The UK is also in danger.
But in the absence of a recession in US, coupled with general market unease about China and a 'wait & see' on the new US administration, there's not much low-cost money available to feed NZ mortgage refinancing. AND $NZ falling against the US, poses a risk to off-shore lenders, which will affect the cost as well.
Hi David, as a longstanding banker and mortgage adviser, I take exception to your comments. Most of us have a very good understanding of the interest rate market and endeavor to advise our clients accordingly in both declining and inclining interest rate markets. In the current climate, I am recommending fixing shorter term (6-12 months), to ensure my clients do not "miss the boat" as interest rates continue to reduce, and once rates bottom out, likely towards the end of 2025, we will have a different conversation, and look to lock rates in longer term, or discuss splitting their mortgages to spread their risk. Most lenders do not pay advisers a refix fee, and for the others, it is a very minimal remuneration, which would barely cover our time. At the end of the day, our clients make their own decisions, but I, for one, feel it is imperative to assist my clients through this process, as it is all part of great service, and keeping in regular contact with my clients. That's just my 5 cents worth.
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