When it comes to lending, it doesn’t all begin and end with the big banks, realtor says
The Reserve Bank yesterday delivered a 50-basis-point hike, taking the cash rate to 5.25% – a move Tim Kearins (pictured above), owner of Century 21 New Zealand, said was “not unexpected” and “still workable.”
The cash rate is now at the highest level since 2008, when it reached 8.25% and is close to RBNZ’s forecasted peak of 5.5% this year.
Historically, the average rates for Kiwi borrowers have been around 6% or 7%, with one- and two-year rates at retail banks now starting to stretch to the top end of that.
“Given so many had locked in at 2% or 3%, it will be a tough winter for a lot of homeowners re-setting with a much higher interest rate,” Kearins said.
The Century 21 boss said another cause for concern was potential buyers’ access to credit.
“Here’s hoping the banks assessments and stress testing of applicants doesn’t get too prohibitive that fewer and fewer are able to borrow in the first place,” Kearins said. “That would only exacerbate any issues in and around the real estate market. The government promised last year that it would get slightly less prescriptive with home loan lenders, but stories from the frontline remain mixed.”
He said prospective borrowers should know that it doesn’t all begin and end with the big banks. Mortgage brokers can often deliver more competitive rates and greater borrowing flexibility.
“For first-home buyers who can cobble together a deposit and secure finance, one small mercy is that in a softer market they can often make up some ground with a good sale negotiation by their real estate agent,” Kearins said.
He said more opportunities await buyers out there and that it’s potentially a prudent time for renters to take the plunge, with rents continuing to rise – a situation not helped by shortages caused by summer’s weather disasters.
According to MBIE’s latest Tenancy Services rental bond data, median rents nationwide are up $175 per week since 2017 – reaching $575.
“For tenants sick of paying sky-high rents, who are fortunate enough to possibly buy, they should do their initial sums on a mortgage calculator,” Kearins said. “Despite rising interest rates, they might still be surprised. Then they need to shop around to get the best deal.”
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