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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 - June's Property Gazette

Published by Scott Miller on Saturday, June 15, 2013 in

As the winter months bite there appears to be no slowdown in property sales around New Zealand. Average days to sell is still below 30 and house prices continue to increase due to lack of supply.

It has been widely reported that the Reserve Bank has been looking into ways of slowing this process down. About a month ago they announced they are placing pressure on the lenders in New Zealand around the ease of approving high loan to value ratio loans.

This pressure is now taking effect with lenders approving fewer 95% percent loans. 95% loans applications that would have sailed through 3 - 4 weeks ago are now being declined, simply because lenders are being pickier on what they approve.

I was asked to comment on these changes in an article by Tracy Wither of Bloomberg New Zealand. Please click here to view the article.

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.

                                            Current Interest Rates as at 14 June 2013  
                               Variable                      5.74%  
                               6 Month Fixed             4.99%
                               1 Year Fixed                4.94%
                               2 Year Fixed                4.99%
                               3 Year Fixed                5.65%
                               5 Year Fixed                5.65%

Interest Rate Outlook

We are currently stuck in that awkward place, caught between the rock of a rising housing market and the hard place of an overvalued exchange rate. The Reserve Bank is painfully aware that the lowest mortgage rates in half a century are adding fuel to the housing market but it is loathed to raise the official cash rate given the risk the exchange rate could keep rising and push inflation further below their 1-3% target range.

The number of houses sold over recent months has been on the rise and this has coincided with growing momentum in mortgage lending to the household sector. Add the recent lift in permanent and long-term migration to the mix, and tensions within the housing market are becoming more and more evident.

While the above will keep talk alive around the prospect of the official cash rate moving up, we actually see the Reserve Bank utilising “macro-prudential tools” as their first line of attack to calm overly exuberant pockets of the market. What does that mean? Essentially, they may limit or put restrictions on the bank as to how many high LVR loans they can write or restrict the areas they can be written in. As an example they “could” stipulate that borrowers must put 10% minimum equity into property in the Auckland area as opposed to 5% elsewhere, as it is in the “big smoke” where most of the concerns lies.

In terms of interest rates and the best strategy in the current market, there are not many bad options. We don’t see a lot of value in the variable or 5 year fixed rates but with 1 & 2 year rates currently sitting at or under 5% and mid-range fixed rates of 3 years at 5.50% these offer good value. Perhaps a mix of some of these is the best solution mixing the cheapest money with some mid-term certainty and still enjoying a blended low rate of low 5%. As always though, please sit down with us and talk through your situation as everyone’s circumstances are different.

What’s Hot

Do you want, a new 42 inch LED TV or a new Mini iPad, take your pick, the banks are throwing “gimmick” incentives at clients to try and win their business. Please be aware in most instances you can actually substitute these gifts with cold hard cash and remember, “beware the banker bearing gifts”.     

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