Understanding the economics behind our property market is tricky, however the Harcourts Optimize Group is lucky to have our wonderful Mortgage Adviser, Emily Clyma, on our team. We sat down with Emily to chat about the current state of the market, mortgages, lending and what changes could be on the horizon that might impact home owners or buyers.
Q: Where are current mortgage rates sitting?
A: Mortgage rates are currently sitting very low! Rates range from low in the 4% bracket to High 5% bracket. The higher rates are for the longer termed rates like 3-5 and for those who have a low equity loan. So, if you have a deposit of 20% or more, like the banks are looking for, you are looking in the low 4% range.
Q: Who are these rates appealing to or geared towards?
A: Right now a number of the banks do not have a lot of funding for very low equity loans (this means a 90% deposit or less) so they are favouring those with a 20% deposit or more. In saying this, it is very much a case by case basis and it always pays to make a call and have a chat with a trusted advisor to see if there is room for movement. Mortgage advisors may know other options or ways to getting into the market – even if you don’t have a large deposit.
Q: Where is the OCR sitting and can we expect that to change any time soon?
The OCR is currently sitting a 1.75 and has been since 10th November 2016. Here is a snippet from analysts at the ANZ Bank about the cash rate and some of the things impacting it…
"The economic outlook is looking less assured and there are questions around the strength of domestic demand going into the second-half of the year. Data has been mixed but is generally a bit more downbeat: businesses are pessimistic and consents have dipped, but households have been resilient. We do not expect that the cycle is about to roll over, with a number of factors supportive of growth, but we do think it will be difficult to grow at trend. In that environment, it will be a struggle for core inflation to return sustainably to the RBNZ’s 2% target. As such, we expect the OCR will remain on hold for some time yet – and a cut is possible should economic data disappoint."
Q: Are banks being wary of anything in particular when reviewing mortgage applications?
A: I am finding that the banks are not favourable towards applicants with a massive amount of short term debt, especially when that debt is more than the deposit being put forward for the purchase. They also favour those who have permeant employment, but again, applications are all assessed on a case by case basis.
Q: Any other comments or an outlook for the future, specifically for Whangarei and surrounds?
This is something that the ANZ Bank touched on in their latest announcement that sums things up quite nicely. They re-enforce their unfavourable position towards short term debt, however suggest that LVR restrictions might ease in the near future, meaning lower deposit loans may be approved a little easier than they currently are… Great news for first home buyers!
"Since late 2017 households have been building their housing equity. In part this reflects reduced turnover as the housing market has cooled; high turnover tends to be associated with increased debt because buyers typically have less equity than sellers. Recent lower turnover partly reflects government policy changes, uncertainty and affordability constraints. But credit conditions have played an important role in reducing turnover and building housing equity too. In addition, households are perhaps more constrained or more cautious towards debt in the post-crisis period. Nonetheless, debt levels remain high, meaning that households will be vulnerable should house prices fall or interest rates rise. The fact that those entering the market now have bigger buffers does help mitigate the risk and the potential fallout of a disorderly housing market downturn, with macro-prudential policy having played an important role here. But in light of financial stability risks, we expect that the RBNZ will take a cautious (and gradual) approach to easing loan-to-value ratio restrictions. An easing in November is possible, but settings are expected to remain “tight” for some time."
Emily Clyma, Harcourts Optimize Group’s trusted Mortgage Adviser is here to help with any of your mortgage questions. Just click here and send Emily an email.