The latest monthly housing figures from the Real Estate Institute of New Zealand (REINZ) indicate that those who purchased their first homes during the period of historically low interest rates in 2020-2021 may be facing a bleak future.
House prices have fallen 17.5% from the Nov'21 peak. For first-time homebuyers this seems to indicate that they have been failed by the system.
The Reserve Bank has need hell bent on creating a recession to try and smash our high inflation...this may lead to loss of jobs which means, this group, along with others, could become the sacrificial lambs of an unprecedented time in New Zealand's economic and financial history.
Borrowing and buying property was encouraged during the Covid pandemic by providing wage subsidies, mortgage deferrals, and removing loan-to-value ratio restrictions on low deposit mortgages.
BUT, with closed borders, lockdowns and vaccines, the terrible forecasts of the potential impact of the pandemic on the economy and health system, fortunately, did not come about.
As a result, with low interest rates, high job security, lender enthusiasm, and FOMO, Kiwis raced head long into mortgage debt. So, the RNVZ went for it and lifted the OCR at breakneck speed ....from 0.25% to 5.25% now. This forced banks to increase their mortgage increase rates to where we find ourselves today.
The good news is that it is very hard to see rates increasing more than they are now so if your number make sense now is a pretty good time to consider buying - rates likely to reduce towards the back end of 2024 and property price levelling off and rising soon after that as well.