A week of big news in interest rates and the New Zealand housing market

A week of big news in interest rates and the New Zealand housing market

Surprised-looking yellow lego man in a blue outfit

There’s been a whole lot happening out in the world of interest rates, and indeed the wider housing market, over the last week.

It started last Wednesday with the Reserve Bank’s (RBNZ) latest Official Cash Rate announcement

Despite holding the OCR steady at 5.5% again, the commentary the RBNZ offered up alongside the decision was surprisingly hawkish.

Although most economic indicators are painting a pretty sorry picture, the RBNZ doesn’t think higher interest rates have done the job quite yet, thanks, in large part, to sticky domestic inflation.

It even went so far as to say that it hasn’t completely ruled out the possibility of another rate hike before the end of the year. Not the news any of us wanted to hear.

Wholesale interest rates climbed slightly in response to the news, and there’s a risk that bank mortgage rates may follow suit – not in terms of advertised rates, but it is likely to impact borrowers’ ability to negotiate a better deal.

The best negotiated one-year mortgage rate out there in recent weeks has been 6.85%. If you’re in a position to re-fix any time soon, the recommendation would be to jump on that as quickly as possible, because there’s a chance that kind of rate will disappear (at least in the short-term).

The other big news to hit the housing market in the last few days has been the removal of the First Home Grant scheme

Government made the announcement the same day as the OCR announcement, with final applications closing at 1:00pm the same afternoon.

It sounds like terrible news for first home buyers, but the actual impact is likely to be relatively limited.

Strict eligibility criteria meant the Grant was out of reach for a significant number of first home buyers, either because they didn’t fall under the income caps or were buying above the regional house price caps.

Where people were eligible, it wasn’t often the difference between them being able to buy or not. It was more of a nice-to-have — a bit of extra cash in the bank – for people who were already in a strong position to buy.

The good news is that, for first home buyers who do need support, there are still really effective schemes in place that make it possible to get into home ownership with as little as 5% deposit. These include Kāinga Ora’s First Home Loan scheme (targeted at lower-income households), and Squirrel’s Launchpad, designed for good earners who have struggled to save a big enough deposit.

And it doesn’t stop there: on the cards this week is Budget 2024

The Government is set to announce Budget 2024 on Thursday 30th May, which is likely to bring further change impacting interest rates and the housing market.

Check in again next week for an update on that.

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