Just as Kiwis were getting used to the idea the Reserve Bank of New Zealand (RBNZ) might end its program of interest rate cuts, Westpac NZ shocked everyone by raising rates 0.3% on fixed term loans.
The move prompted Finance Minister Nicola Willis to suggest owners and first-home buyers should “shop around”.
After Westpac announced its two-year fixed term would now have a 4.75% interest rate, Ms Willis responded sharply. “Westpac have made that choice, other banks have not,” she said.
“Hold your bank’s feet to the fire. See if another bank will give you a better rate. Make them compete with each other. Don’t just accept that you’re getting the best deal right now.”
As an experienced agency, we’d respectfully point out to owners and first-time buyers that not all loans are equal.
The ones offering the cheapest rates often come with the most stringent conditions – and that may not suit your circumstances. It’s wise to talk to a bank’s loan officer or a mortgage broker before making any decision.
The Prime Minister, Christopher Luxon, also weighed in, saying that after New Zealand had endured 12 interest rate rises to curtail post-Covid inflation, the country had now seen nine cuts.
“For a New Zealander (who is) on an average mortgage, that’s $10,000 a year of savings that they’ve got through nine interest rate cuts,” he said.
The Westpac NZ move comes after the RBNZ cut rates in November by 0.25% to 2.25% – the lowest level since mid-2022.
“Future moves in the OCR (Official Cash Rate) will depend on how the outlook for medium-term inflation and the economy evolve,” the RBNZ said in a statement.
For buyers and sellers alike, this is the time to make your move.
This is the most affordable moment for first-time buyers, who are already a third of the buying market.
For upsizers, it means the value gap between your current property and your next purchase will only widen as a property recovery emerges.
Here are seven tips for upsizers contemplating their next move in the current market conditions:
Value Gap – In a softer market, the price gap between your current home (the smaller, less expensive property) and your next home (the larger, more expensive one) is often at its smallest. While your current home may not sell for its peak price, the difference you have to pay to “trade up” is likely lower than it would be in a strong market.
Be ambitious – Target a property that represents a significant step up in size, location or features, as the leverage of low prices on a higher-value asset works in your favour.
Think long-term – The early recovery phase is the time to identify the suburbs that will lead the next boom. Focus on fundamental factors for your new home – access to transport and employment, good schools and amenities.
Sell First – The biggest risk for an upsizer is buying a new home before selling the old one. If the current property doesn’t sell quickly, you must carry two mortgages. Prioritise selling your current home first to know your exact budget. If you find your dream home and can’t wait, make your offer conditional on the sale of your current property, often called a “subject to sale” clause.
Be Decisive – Research comparable recent sales, and make a competitive offer without attempting to “low-ball”. A fair offer is far more likely to be accepted by a motivated seller.
Stress-test – Lower interest rates make borrowing cheaper now, but they are likely the very thing that will trigger the market recovery and subsequent price rises. Make sure you’re still comfortable if rates begin to rise in the next few years.
Settlement strategy – Upsizers have a complicated transaction involving both a sale and a purchase. Use the current buyer’s market to negotiate a settlement date that aligns with your sale date.