Investor rule changes - what's the impact? & OCR stays unchanged

Welcome Warwick

As I am looking to grow my business with a strong focus on customer service, it is with great pleasure that I can announce that Warwick Evenson has decided to join my team as Mortgage Business Manager. He comes with great corporate experience in leading teams and business management.

With most businesses looking to cut cost in delivering service I am looking to invest in that area as I believe the customer should be at the forefront of any business. This is true not only pre-sale but, even more importantly, post-sale.

I look forward to what lies ahead.

The impact of investors

No matter how many measures the government tries to throw at the property market to slow down investor demand, it still seems to be going strong. In fact, with sales volumes at an 8-year high, and annual house price inflation at an 11-year high, it has continued to defy efforts – but will that continue?

This could be due to a number of investors trying to get into the market ahead of new rules targeting Auckland investors coming into play on November 1. $2.239 billion was loaned to investors nationwide for house purchases in September; a huge increase from $1.989 billion in August. The rules taking effect next week will prevent Auckland investors from borrowing more than 70 per cent of the value of the property they are buying. It will be interesting to see if this rule affects the market significantly.

We continue to see large numbers immigrating here, but luckily housing supply is picking up, with the highest number of Auckland residential consents issued annually in more than a decade. Credit growth has firmed, but the easing off in mortgage approvals and clearance rates at auctions, signals a pending housing market lull which I feel would be reflected in the statistics for the last quarter of the year.

If you’re finding it difficult to get mortgage approval, just get in touch.

Growing regions

Annual house price inflation has certainly been working its way up, hitting an 11-year high; many are benefitting from a lively Auckland housing market with higher prices in nearby regions as well. Although regions vary, house prices are increasingly outracing both incomes and rents – these are supported by lack of dwelling supply, lower fixed mortgage interest rates, and growing immigration levels.

There is evidence that policy changes aimed at Auckland investors may be starting to have an impact, and we are likely to see more with new rules coming into play in November. This is in contrast to the rest of the country, where the market seems to be strengthening.

Economy overview

The lower NZD is reflective of slowing momentum over the past year, with only modest growth expected over the coming 12 months. This is due to several different factors, including:

  • lower terms of trade (export prices)
  • peaking earthquake rebuild activity
  • capacity bottlenecks in some sectors

Don’t worry too much though – this is simply the economy slowing down, as opposed to a full downturn. The economy does have a reasonable backbone, although we’ll be looking at the internal scene, in particular China.

Financial conditions are generally fairly good, with a lower OCR is supporting the housing boom outside of Auckland, the lower NZD lifting export prospects, and rising construction levels. All will help the economy recover in late 2016.

Fixed rate strategy

Fixed mortgage interest rates have taken a fall this month, with cuts to standard rates and one and two year special rates offered by some lenders close to multi-decade lows. These rates look attractive as they not only offer a low rate, but strike a balance between providing flexibility and certainty. Although the prediction is for rates to remain low, I would suggest you take advantage of some of the lowest long term fixed rates available at least with a percentage of your funds. Touch base with me before you lock it in as there are a few things which need to be taken into consideration.

As always give me a call if you have any questions in regards to rates or investment.


0211 9444 24