How to Manage Increased Mortgage Rates, NZ

How to Manage Increased Mortgage Rates, NZ

Mortgage rates in New Zealand have been rapidly increasing. Some experts have stated that this is a peak in the mortgage rates, others say that the mortgage rates could quickly go to as high as 7%. Regardless of the theories, home buyer and seller behavior changes with peaks and troughs in mortgage rates. As an online marketplace, with property listings from around New Zealand, Shopless has looked into the effects of rising mortgage rates on different groups within the property market. To give you more of an idea of what to expect when purchasing or selling your home. 

First Home Buyers

It has been predicted that because of the increase in mortgage rates many first home buyers will be more hesitant when it comes to purchasing a home. The increased mortgage rates have a direct affect on how they perceive the ability to buy a house. There are also a few factors that do impact first home buyers’ ability to purchase. 

Firstly increased mortgage rates may limit first home buyers purchasing ability. Limiting the pool of houses available to purchase within their required price range. Additionally as the mortgage rates increase it impacts the ‘serviceability’ of mortgage payments for first home buyers. Impacting their ability for first home buyers to pay for the mortgage. Also taking into account other factors such as inflation, first home buyers have less financial freedom with a larger recurring mortgage payment. . 

A benefit of rising house prices for first home buyers who do see the mortgage as still being serviceable, is that often with mortgage rises there are also more mortgagee sales. These are sales of homes that need to be sold quickly as the homeowner was not able to manage their own mortgage and the bank has taken ownership. Which can mean homes are being sold more urgently, some homes can be sold below market value or at a reduced rate in order to sell rapidly.  

New Home Buyers or Investors

For home buyers who are either investors or looking to buy your next home the increased mortgage rates will also have a noticeable effect. For those with investment properties or looking to buy an investment property a long term strategy may need to be considered. In a previous hot property market, where the mortgage rates are extremely low. Buying and selling properties can happen quickly and with noticeable gains. Considering properties that can make do as a rental instead of immediately selling is a good option when the mortgage rates increase. As the turnover of properties has a tendency to start to slow, creating a bottleneck where more individuals are looking to rent instead of purchase. 

For new home buyers it may benefit you to look to buy during a mortgage rate increase. This can mean that the housing market slows and you have more time to consider your ideal home. And potentially more negotiation power, depending on the situation. The housing market is still popular at the moment, so it really depends on your positioning as a next home buyer.

Homeowners Looking to Sell

As it stands across the country increasing mortgage rates have not yet had a noticeable affect on the housing market. Meaning if you are looking to sell in NZ it is still a great time to to sell your home. Investopedia analysis of rising mortgage rates, states that increased mortgage rates is not something that sellers should be concerned about. However the talk around does often create a hesitancy to buy for some groups of people. Subsequently when you are selling your home you should consider the fact you may be advertising your home for longer. 

However, as last year’s length of time houses were on the market increased from 27 to 29 days – in a hot housing market – home owners should not be too concerned about the property market when it comes to waiting for their home to sell. 

Shopless has looked into several groups of people and how the increased mortgage rates may affect each group. If you are in the market for your next home, or want to list your home make sure to check out our online marketplace for homes across New Zealand.

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