Banks are going to war over interest rates, and borrowers are the winners.
Right now you can get a sub-4% loan for up to three years fixed with most of the major banks – plus we’ve heard stories of substantial cash-backs for those switching banks, as well as some lenders covering legal fees and the cost of switching.
This is due to the Reserve Bank lowering the official cash rate (OCR) to 1.5%, the first cut in over two years and the lowest OCR on record. What’s more, the Reserve Bank has hinted at the possibility of a further cut, which should give you confidence if you’re considering taking out a loan in 2019.
Granted, it’s not always easy to get your loan approved right now. Banks are tougher than ever on servicing and deposit requirements, closely examining your accounts line-by-line in many cases to work out your ability to repay your debt. However, that scrutiny may be well worthwhile it if you can leverage your money into a good investment – because the low OCR means that savers are getting very little interest on their money whether it’s in a savings account or a term deposit. If you can find an investment paying 5%, like many of our rental properties, it’s a much higher return than you can expect from a term deposit.
There’s also been some CoreLogic predictions about the potential for the loan-to-value restrictions on investors and homeowners to be tweaked later this year. That may open the door for a slightly higher number of sub-30% loans to investors or even a drop from 30% to 25%. One more forecast to add into the mix: the prediction from Treasury that house prices in New Zealand will rise by 18.3% between now and 2023.
All this combines to create a picture of a solid housing market, a positive outlook for investors and this being an excellent time to borrow money at an affordable rate. Leave your money in the bank and it’s barely keeping up with inflation: maybe it’s the perfect time to put your money to work in the property market.