Fix rates now bank urges

Dampening investor demand isn’t slowing the monthly pace of house price inflation, says ANZ’s latest Property Focus.

Wednesday, June 23rd 2021

ANZ chief economist Sharon Zollner says this has come as a bit of a surprise and the bank has upgraded its near-term house price forecasts to include a little more momentum.

It has also brought forward the date it expects the Reserve Bank to start raising interest rates by six months to February next year.

“This means mortgage rates are expected to rise a little sooner than before, taking some of the steam out of the housing cycle a bit earlier,” says Zollner.

The report says housing data clearly shows the market is going through an adjustment period following the Government’s policy changes to tax deductibility and the bright-line test.

Exactly what things will look like when the dust settles remains uncertain, says Zollner.

But it’s not just house prices that have been on the up lately. Rent inflation is showing tentative signs of acceleration, with the 0.5% month-on-month in May the fastest monthly increase since March 2019.

“That’s following a few months of average to sub-par rental inflation, meaning the annual change is nothing spectacular, but higher-than-otherwise rents are an unfortunate side effect of the Government’s tax policy changes, but the magnitude of the impact is unclear,” says Zollner.

Interest rates

Rising interest rates will impact households’ ability to service mortgages and pull down spending in other areas.

The report says households’ debt serviceability looks like it will withstand 100 basis points or so of interest rate hikes, but all this debt accumulation means households are very susceptible to an income shock.

Household debt now stands at almost $310 billion compared to $159 billion in 2008.

“Even if higher debt servicing cost jumps aren’t a problem in terms of households being able to meet mortgage payments, they can still crimp discretionary spending and therefore have an impact on the likes of the hospitality sector,” says Zollner.

The report suggests householders start fixing mortgages on longer-term rates now.

“Appealing as lower short-term rates are, they don’t offer certainty for long,” says Zollner.

“We think that certainty is of greater-than-usual value at present and it is worth considering fixing for a longer term, even if it costs more.

“In short, simply selecting the cheapest rate now could work out to be more expensive in the long run,” says Zollner.


No comments yet

Heartland Bank - Online 1.85
HSBC Premier 2.19
Kainga Ora - First Home Buyer Special 2.25
HSBC Special 2.25
SBS Bank Special 2.55
China Construction Bank Special 2.65
Kainga Ora 2.88
ICBC 2.89
TSB Special 2.94
First Credit Union Special 2.95
Resimac 2.98
Heartland Bank - Online 2.35
HSBC Premier 2.45
China Construction Bank Special 2.65
Resimac 2.79
SBS Bank Special 2.95
Select Home Loans 2.99
Nelson Building Society 3.24
Kainga Ora 3.28
ICBC 3.29
TSB Special 3.40
First Credit Union Special 3.45
China Construction Bank Special 2.99
HSBC Premier 3.19
Select Home Loans 3.54
Resimac 3.54
TSB Special 3.94
SBS Bank Special 3.95
ICBC 4.09
Kainga Ora 4.22
Bluestone 4.29
SBS Bank 4.45
The Co-operative Bank - Owner Occ 4.49
ANZ Blueprint to Build 1.68
ASB Back My Build 2.04
Heartland Bank - Online 2.25
Resimac 3.39
Select Home Loans 3.49
Bluestone 3.74
Kiwibank Special 3.75
Kiwibank 4.00
Kiwibank - Offset 4.00
ICBC 4.15
Kainga Ora 4.43

More Stories

House price growth on the downward slide

Thursday, October 28th 2021

House price growth on the downward slide

House price growth has dropped from a quarterly rate of 8.1% in April to 4.8% by September.

Tribunal: Anti-social behaviour – tenancy terminated

Monday, October 25th 2021

Tribunal: Anti-social behaviour – tenancy terminated

A tenant who cut the Sky cable, removed fuses from the fuse box and put them back incorrectly, and tagged items on the premises has had his periodic tenancy terminated.

Investor juggernaut slowly grinding down

Friday, October 22nd 2021

Investor juggernaut slowly grinding down

Property buying by mortgaged investors is back down to the levels just before the loan-to-value restrictions were lifted in the second quarter last year, which sparked investor demand back into life.

FOMO haunts property buyers

Wednesday, October 20th 2021

FOMO haunts property buyers

Fear of missing out (FOMO) is rising in the residential property market. Sally Lindsay reviews the figures from Tony Alexander and REINZ.