Time for renters to get on a mortgage calculator - OCR cut
Wednesday, 7 August 2019
“Potential first-home buyers need to head to a mortgage calculator. Once we see how much retail banks are going to pass on, those currently renting might be pleasantly surprised,” says Derryn Mayne, Century 21 New Zealand owner.
The real estate boss’s comments come as the Reserve Bank announced it will cut the Official Cash Rate from 1.50% to a new and surprising record low of 1.00%.
New Zealand economists believe mortgage interest rates will drop a bit further in the coming months, but not as low as the 1% to 2% rates other countries have experienced.
Ms Mayne says now is a good time for first-home buyers to do their sums on what they’re paying in rent compared to what the cost would be to service a mortgage. They should also seek the advice of a mortgage broker to assess their lending capacity and best options.
Currently based on the typical two-year home loan bank special of 3.79%, buying a house at the national median price of $585,000, after paying a 20% deposit, would cost in interest repayments about the same as paying the national median rent of $500 a week.
“While long-term capital gain gives buying an inherent advantage, for most Kiwi renters it remains a difficult transition. However, with this OCR cut and the possibility of more to follow, the case to buy will only become stronger and stronger.
“If interest rates fall to say 3% percent in the coming months and rents across the country continue to rise, while house prices remain steady, it will be the best opportunity for first-home buyers to get into the housing market for some years - if they can stump up a deposit.”
Ms Mayne says homeownership in New Zealand has proven itself again and again as a good term investment and is a significant advantage when people retire.
“We all want more Kiwis to get into homeownership. My only worry is that the Reserve Bank’s tough 2013 LVR policy remains in place, albeit it has softened somewhat.
“Regardless, the stringent deposit requirements are still too tough for many. That’s a big shame, as increasingly more and more New Zealanders renting would be able to service a mortgage in the current environment,” she says.
Derryn Mayne says Century 21 Home Loans is expecting a lift in enquiries following this announcement, with mortgage brokers generally best placed to advise people which lender and what approach is best suited to people’s current financial situation and future plans.