Current Markets

7 November 2014
As expected last week the Reserve Bank have opted to keep the OCR at it’s current rate.  What is interesting is the indication that the Reserve Bank has softened their outlook and believe that there will be no lifts in the OCR in the immediate future. 
The Reserve Bank announcement referred to the 1 percent CPI Inflation being modest and attributed that to  “subdued wage inflation, well-anchored inflation expectations, weak global inflation, falls in oil prices, and the high New Zealand dollar. House price inflation has fallen significantly since late-2013, in part due to interest rate increases and the LVR (Loan to Value Ratio) restrictions (ie the restriction on any lending above 80% of the value of property)”. 
While it is arguable that the LVR restrictions attributed to falling housing prices – particularly in the areas that were causing the most concern for unsustainable growth such as Auckland and Christchurch -the fact is that housing prices have come back particularly in provincial areas.  There is a lot of talk that LVR restrictions will be lifted as early as mid next year and we are watching that space most carefully.  
Locally agents have commented that housing stock is limited and demand is exceeding supply.  We are certainly seeing evidence of this with many properties going to multiple offers (ie having more than 1 active purchaser) and the length of time taken to sell a property (for certain properties) decreasing.
Indications are pointing very clearly that the housing market may lift which will be good for home owners wanting to sell.  Not so good for First Home Buyers.  
Economists are predicting that the OCR will remain unchanged until March – September next year with increases predicted to be lower than initially predicted and peaking in September 2016. This is good news for home buyers who can feel confident that rates will remain lower for longer.  For existing home owners with mortgages this would seem to indicate that fixing their home loan at a competitive 3 year rate would be a good medium term approach.
All these factors seem to indicate that this may be the last “best days” for home owners entering the market with sub 6% lending a thing of the past.
Any mortgage strategy is only sound if it allows you to achieve your financial goals and for that reason it is recommended that advice from a Mortgage Adviser is obtained before making any decisions.  This ensures that an individual’s situation is accurately assessed and the plan is tailor made to accommodate that particular person’s goals -  no matter what the market conditions.

Published In Whakatane Beacon

This post was written by

Trish Marsden - who has written 96 posts

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