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Mortgage Advice Blog

Get the latest news and tips about mortgage finance and the property market. Scott Miller, mortgage broker from Advanced Mortgage Solutions comments on housing and lending.

Mortgage Brokers Christchurch - Property Gazette - April

Published by Scott Miller on Thursday, April 04, 2013 in

 

 

The fantastic summer weather we have been enjoying appears to be continuing into autumn. House prices continue to increase and time to sell a property continues to decrease. As far as I can tell there is no slowing in this process and it seems to be set to continue for some time yet.

On a personal note I am competing in the 101km, 2013 edition of the Graperide up in Blenheim this weekend with a couple of friends. Something I am looking forward to, let's hope the weather stays fine.

As you will read below, it has never been a better time to fix your mortgage. Please contact me NOW to see what I can secure for you.

So on with what’s happened this month.               
                   

           Current Interest  Rates as at 2 April 2013 

                     Variable                     5.55%  

                     6 Month Fixed            5.10%

                     1 Year Fixed              4.95%

                     2 Year Fixed              5.30%

                     3 Year Fixed              5.49%

                     5 Year Fixed              5.65%

Interest Rate Outlook

A rift is brewing in the mind of Reserve Bank Governor, Graeme Wheeler. On one hand, he is keen to see the overall economic growth we are enjoying continue; on the other, he is rightly concerned by the highest level of house price inflation since 2007. Because of this, he is investigating rarely-seen alternatives to lifting interest rates, to try and stem spiralling house prices (particularly in Auckland and Christchurch).

He doesn't have many options, but two being considered are: increasing the size of the deposit needed to buy a house from 5% to 10, 15 or even 20%; or forcing New Zealand banks to hold a higher level of funds on deposit for every dollar they lend out.

A move to increase the required deposit for a house purchase would surely slow the property market down, but could be political suicide, as you’d expect a nasty backlash from consumers, especially first home buyers. The easier option may be to force banks to hold a greater level of capital in reserve, which would push interest rates up: lenders would be forced to attract more people to saving through term deposits, for example, and this could increase the amount of money available to lend, as all lenders would be doing the same. Additionally, it wouldn’t impact interest rates in other areas of the economy or the exchange rate. This may be a less risky political move for the Reserve Bank to make, although it would come under a lot of pressure from the big banks to not do so. It may come down to a case of who the government is less scared of: the voting public or the big banks.

Interest rates remain at record lows, with fluctuation occurring as different banks offer different “specials” in an attempt to grab some market share. The current “hot” one-year rates available (we regularly see these under 5% once discounted) have a lot of appeal, but consideration should also be given to the lowest ever long-term rates on offer, with three- to five-year rates sitting in the mid- to high-5% range. These provide excellent stability at affordable rates, and will look very attractive in two years’ time.  
         
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