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 retail banks, but Century 21 is expecting a strong spring and summer with low interest rates enabling more people into the market.

56975936 - new housing project in progress construction building industry concept rows

56975936 – new housing project in progress construction building industry concept rows

“With many people already able to lock in a mortgage rate around 4 percent, many renters are discovering they’re now better off buying – if they can first cobble together a deposit,” says Geoff Barnett, National Manager of Century 21 New Zealand. “At the same time, the likes of retirees are increasingly contemplating trading in their low-yielding term deposits for an investment property.”

The comments from the real estate boss follow the Reserve Bank cutting the Official Cash Rate by 25 basis points to a record low 2.00 percent.

“As well as pretty tough deposit rules these days, banks are really scrutinising people’s ability to service mortgage debt long-term,” Barnett says. “The Reserve Bank’s latest cut can only help get more young couples and singles over the ‘mortgage approval’ line.”

Barnett believes 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 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 percent 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 Barnett.


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