Mortgage Stress Looming for Majority of Kiwi Homeowners amid Rising Rates and Housing Market Shifts

Date Published: 1 April 2024

Key Facts

• 59% of existing mortgages in New Zealand are due for repricing within the next year, likely adding more to monthly payments due to higher interest rates.
• Despite the looming rate hikes, home lending is trending upwards with new lending in February reaching $4.9 billion, a $1.1 billion increase from the previous year.
• New-build properties, while usually more expensive and higher quality than existing homes, may witness price drops as construction and tax incentives cool down and demand shifts back to existing properties.
• An easing inflation trend is visible, although little evidence points towards a near-term cut in the official cash rate or substantial mortgage rate reductions.
• New Zealand’s job market appears to be growing, signaling a positive effect on the housing market, while new dwelling consents are likely to decline.

Article Summary

The Reserve Bank of New Zealand recently published data showing that 59% of existing mortgages are due for repricing within the next year. This is expected to result in higher monthly repayments for numerous homeowners. Despite this potential hike in mortgage costs, the amount of new lending is on the rise, with a total of $4.9 billion reported in February, marking a $1.1 billion increase from the previous year.

In terms of property types, new-build homes have traditionally been more expensive than existing properties due to their higher quality and lower maintenance costs. However, this price gap may start to close as the construction sector cools down and adjustments to tax rules shift demand back to existing properties.

Looking at the broader economic landscape, the inflation trend seems to be easing, potentially slowing down the rise in mortgage interest rates. On the job front, data from Stats NZ is also indicating potential growth, a positive sign for the housing market. However, the market for new dwelling consents is forecasted to slide downwards, with a further fall pretty likely.

Source Link: To read the full article, click here.