In my last post in November, I said that fixed rates should begin to rise around the middle of 2026. In fact this rise in rates arrived 6 months early and began in December! Not much of a Christmas present. Fortunately yesterday's RBNZ rate announcement has been met with a calmer response.
The 1 year rate remains at its low of 4.49% while the 2 year plus rates have risen slightly. This is a clear signal that the fall in rates is over and the expectation is that they will rise from here. Despite this small rise, in my view the 2 and 3 year rates are still good value and so fixing longer remains the best option.
The good news is that the experts are not expecting a return to the very high rates of a few years ago. They were a response to the high inflation caused by the Covid crisis and there should be no repeat this time around.
A broad range of economic indicators show that the NZ economy is in the early stages of a recovery. And concerns about inflation remain - power bills and council rates being key contributors. Inflation is also a concern in Australia and the US. They have interest rates well above our own - its usually the other way around.
First home buyers are continuing to take advantage of the lower interest rates and relatively stable house prices by buying in record numbers. Some property investors are active but are finding it harder to attract and retain good tenants. Existing home owners (i.e. movers) are holding off that move to a new home, perhaps concerned about job security.
Although house prices have been flat over several years now, the volume of house sales (and purchases) has gradually risen. Total listings (for sale) remains above average but is well below 12 months ago. The market is gradually moving from a "buyers market" to one that is more balanced. A modest rise in house prices is still expected for this year, but it may depend on which city you are in.
If you are thinking of switching banks then a number of banks are offering a potentially large upfront cash incentive payment, but there are some key conditions to be considered first.
My above comments are general, but please do not hesitate to get in touch to discuss your own situation in more detail. And if family or friends need advice on a new or existing mortgage, they are welcome to give me a call.
