Mortgage Wars and Negative Gearing?

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January Market Update

We declare a new mortgage war and ask; will the NZ market follow Australia’s slide?

A major bank just announced a property loan rate below 4%. Is this the first salvo in a new mortgage war? Sure sounds like it! We’re never sure how long rates will stay down for so if your clients are looking to alter their mortgage in the next 60 days, I can have a chat to them and see if locking in a rate is the right thing for them.  And if they’re due to end a fixed term in the next six to nine months they may want to weigh up the cost of breaking their mortgage to re-fix it at a lower rate.

And, now to whether the NZ market will follow Australia’s slide. CoreLogic says no. Here’s their reasons:  

We don’t have a general oversupply of property. Just look at Auckland! Surplus apartments in Sydney and Melbourne drag prices down.

Unlike other nations, our mortgage rates aren’t rising, and may even drop due to the “rate war” reported above.

Australia’s regulators haven’t been as active as ours in curbing risky lending. We’ve had loan-to-value restrictions for about five years and control interest-only loans far more tightly.

If any of your clients are thinking of refinancing, or need help looking for a property loan, feel free to get in touch!

The latest on negative gearing

PM Ardern pledged to end negative gearing and just released Labour’s official policy assessment. What did it say? Property investors hoping for capital gain will be worse off and people struggling to buy a first home should find it easier. Plus there’ll be an extra $190 million p.a. in government coffers.

NZ investor lobby group, the Property Institute, warns their fleeing investors will worsen an existing rental crisis. But, other commentators expect little or no impact; other than to level the playing field for newbies.

Worldwide historical data is thin, so saying goodbye to negative gearing comes with uncertainty. But, when Australia banned it from 1985—87, Sydney rents went slightly up, and everywhere else stayed flat or fell. Go figure…

If you, or your clients, want to learn more about what this could mean for them, please get in touch.