Here’s a great update from Haven Mortgages about what the current situation is with the OCR and housing prices in light of recent events.
Because more than 14 million people are being quarantined worldwide due to the COVID-19 Coronavirus, this could slow down the “rampant” housing market in NZ. House prices could end up slowing sharply, as the effects of the virus take hold on the NZ economy and impact consumer confidence.
Amid growing speculation of how the housing market will fare, the central bank will slash the OCR to 0.75% or even 0.50% this month due to the outbreak but economists suggest mortgage rate decreases will be small. Fixed rates are already low at 3.45% for 1 and 2 years with some lenders, and healthy cash incentives are being offered to refinance. Fixed-term mortgage interest rates could dip if the RBNZ cuts the OCR, and wholesale interest rates fall further. In saying this, we at Haven stress that large falls in carded mortgage rates have already occurred over the past couple of years and we also think that any declines will be minor (circa 0.25%-0.5%) compared with the declines recorded in 2018/19.
We believe fixing and then rolling shorter mortgages terms is likely to be the cheapest option over a five-year time horizon, if OCR cuts do arrive.
Our forecasts suggest mortgage interest rates could get slightly lower over the coming months, but there is a cost in not fixing now which is broadly the difference between floating rates and the fixed term rates currently on offer (over 1% per annum for some terms).
While house price growth is expected to slow in the near-term, economists believe the market will pick up later in the year, helped by lower mortgage rates.
In Auckland specifically, the market has sprung back to life, and we’re seeing a lot more of 95% LVR. There are higher levels of complexity, extra compliance and more paperwork involved. The volumes have blown the banks out, so longer timeframes can also be expected for the time being.
If you’d like to know more about how you can make the most of your mortgage and these lower rates, get in touch with us today!