Property price growth means RBNZ will act, experts say
The Reserve Bank of New Zealand is scheduled to meet on April 13 to announce its next cash rate decision, with advisers across New Zealand anticipating another increase.
In February, the RBNZ increased the cash rate by 0.25% to 1%, with industry experts saying rapid property price growth is the leading cause of higher interest rates.
The Reserve Bank increased the rate by 0.25% in October and by the same amount in November.
“Kiwi property buyers are being affected by rising interest rates as it naturally reduces their affordability as the higher the rates are, the less someone can borrow,” said Kris Pederson (pictured), managing director of Auckland brokerage Kris Pedersen Mortgages and Insurance.
Pedersen said another interest rate rise would affect the economy negatively.
Read more: Rising interest rates – how are they impacting advisers?
“We haven’t seen inflation like this in a long time and if inflation keeps outstripping wage growth, people are basically becoming worse off,” Pedersen said.
“The Reserve Bank was too slow to pull the trigger in raising rates last year and are now behind the curve and are having to raise aggressively.”
Loan Market mortgage adviser Cameron Marcroft said with inflationary pressures and rates expected to rise further, people should consider locking in their mortgages for a longer term to help with budgeting and certainty of repayments.
“We have definitely seen a downward trend in the property market in this first quarter and we would expect to see more of the same for the rest of 2022,” Marcroft said.
Pedersen said there was a good chance the next election would be focused on the economy.
“With the implementation of the CCCFA amendments being so poorly handled, if and how they roll this back is the largest point. I am keeping an eye on it over the next few months.”
With mortgage borrowers paying roughly double the interest rates of last year, Pedersen said there was less discretionary money in the economy, especially at a time where industries such as hospitality, retail, and tourism were struggling.
But he also said prospective property buyers could benefit.
Read more: Renters urged to see a mortgage broker, not give up
“We are at the stage of the cycle where borrowers who have overcommitted potentially may need to look to sell,” said Pederson. “For home buyers who are willing to wait and be patient for the right property there will be some good buying opportunities especially as the media spreads some doom and gloom about the market.”
Pedersen said the key for those buyers was to be prepared and patient because opportunities would arise.
