Global Voice

February Edition

The new year has started with a positive outlook for the housing market in NZ, as recent key metrics indicate a return of buoyancy and confidence in the coming months.

Firstly, inflation data reveals a drop to 4.7%, below the Reserve Bank's 5% expectation. This decrease suggests diminishing chances of further home loan rate increases during the NZ summer. Recently, banks have reduced rates for new loans and refixes by 0.1% to 0.2% for lending up to 80%. While a positive start, there is perceived room for additional rate cuts to benefit borrowers.

The Reserve Bank has introduced a consultation paper to implement Debt to Income Ratio (DTI) in the second half of 2024, aiming to prevent house prices from escalating when interest rates decline. Proposed restrictions include allocating 20% of residential loans to owner-occupiers with a DTI greater than 6, 20% to investors with a DTI greater than 7, 20% of owner-occupier lending to borrowers with an LVR greater than 80%, and 5% of investor lending to borrowers with an LVR greater than 70%. These restrictions, in our view, are more lenient than current LVR regulations, indicating potential increased lending by banks for home purchases.

Investors are awaiting a government decision to roll back the bright-line or capital gains tax to two years. Many who purchased rental properties in 2021 and 2022 may start offloading these properties this winter after the announcement, leading to an increased supply of houses for sale.

Affordability of home loans remains a key challenge for many borrowers. First home buyers are realizing that the gradual decline in interest rates will take at least two years to return to normal levels, likely late 2025 or early 2026. Hence, many are actively looking to purchase homes now, recognizing that their mortgage payments will not decrease soon, making it a favourable time to buy while house prices are still suppressed.

It is a known fact that when interest rates start falling, house prices rise nationwide. Comparing today's interest rates and potential mortgage repayments, for every 0.5% interest rate increase, borrowing an additional $50,000 due to a house price increase results in similar mortgage repayments. The key difference lies in borrowing now while house prices are low, meaning that when interest rates start to fall, mortgage repayments will also decrease. In contrast, borrowing more in the future when interest rates are falling and house prices are increasing results in increased borrowing amounts for the lifetime of the loan, leading to overall higher interest payments to the banks.

To get an expert opinion on how to successfully score a home loan for your next purchase or how to start paying your home loan faster, contact Global Finance today on 09 255 55 00

Is Interest Only Home Loans are good? – For more information, please click

Buying a house at auction: Help for first home buyers in New Zealand – For more information, click

To fix or not to fix – Insights from Global Finance’s Head of Mortgages – for more information, please click

Pros and cons of paying off your mortgage early -for more information,  click

Customer Referral campaign

Global Finance is excited to announce our latest Customer Referral campaign, and we want to take a moment to thank everyone who has referred our services in the past.

Join Global Finance’s Referral Campaign and be in to win a portion of $5000 in prizes! Seize this opportunity to purchase your preferred goods, helping to alleviate the impact of rising living costs and interest rates.

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So, what are you waiting for? Start referring your friends and family to Global Finance today and be in with a chance to win a share of $5000NZD worth of vouchers.

How can you participate?

It’s simple! Just refer Global Finance to your friends and family from January 25, 2024, to September 30, 2024. The more referrals you make, the greater your chance of winning.

We can't wait to hear from you! Not only will you be entered to win a share of the prize pool, but you’ll also receive $250 for every referral if that referral is converted into a successful mortgage or insurance business.