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Mortgage Market February 2023

As we start 2023 it’s important to recognise the trend of increasing interest rates is continuing, here are some tips for buyers and homeowners in this market.



The 2022 mortgage market was one for the history books. We saw inflation rise to 7.3% - a 30 year high, prompting The Reserve Bank of NZ to increase the Official Cash Rate (OCR) from 1.00% in February to 4.25% in November. This had a direct affect on mortgage interest rates which meant both buyers looking to get started in the market, and homeowners needing to refix were potentially faced with mortgage repayments greater than they anticipated.


As we start 2023 it’s important to recognise the trend of increasing interest rates is continuing. Another OCR announcement is due in February with many economists predicting the OCR will reach 5.5% by mid-2023. This is will again have an impact on mortgage interest rates, however there is speculation as to how high they will go.


January 2023 Interest Rates*


Average Floating Rate 7.91%


Special Fixed Rates** Standard Fixed Rates

Fixed 1 year – 6.46% Fixed 1 year – 7.00%

Fixed 2 year – 6.65% Fixed 2 year – 7.19%

Fixed 3 year – 6.73% Fixed 3 year – 7.26%

Fixed 5 year – 6.81% Fixed 5 year – 7.37%

*Figures according to average standard interest rates on 05 January 2023. Interest rates offered can vary between Lenders & based on the clients position.

**Special rates require a minimum deposit of 20% / LVR is less than 80%; Other lender T&C’s apply.



While there has been a rise in interest rates, we have are entered a buyer’s market with less competition and many sellers needing to sell. This has created a great opportunity for buyers exploring their options in the market, with many properties being sold well below 2021 prices. The amount of lending applicants can qualify for has reduced (due to the rise in Lending test rates), in contrast there may be properties now within your budget that were once out of reach.



How to know what you can afford?

“How much can you afford to spend on your mortgage each week?”

This is your budget.


You should always focus not on how much you can qualify for, but rather what you’re confident your family can spend on mortgage repayments.



Mortgage Repayments at 7%*

$500,000 at 7% $767 per week / $3,327 per month

$750,000 at 7% $1,151 per week / $4,990 per month

$1,000,000 at 7% $1,534 per week / $6,653 per month


*Repayments are based on a P&I loan over a 30 year term; mortgage structure varies based on each clients position

 

3 Tips for Buyers


Budget at 8%

Look at the repayments at 8%. This will help ensure the mortgage repayments are reasonable for you with a mortgage that size. If you’re able to secure an interest rate lower than 8%, great! However, you’ll have greater confidence that if rates continue to increase until you refix you’re prepared.


Pre-Approvals

Sellers in this market have a reason to sell. When an opportunity arises, being ready to present an offer quickly may be the key to a successful outcome. Valid for ~90days, you’ll have time to browse & negotiate already having finance arranged.


Stay Organised

Sometimes an opportunity pops up quickly! Having structure to your bank accounts & being able to provide the appropriate documents promptly eg. finalised March 2022 financial statements (business owners) will mean we’re able to submit your application with a faster turnaround.


 

3 Tips for Property Owners


Refinancing may save you thousands

Refinances are becoming increasingly popular as clients aim to lock in lower rates for years ahead, while taking advantage of competitive cash contribution promotions. Your adviser will analyse if it’s worth refinancing taking into account potential break costs, cash clawback and legal fees.


Adjust your Repayments Early

If your mortgage is up for refix in mid-late 2023 and beyond, a great option is to adjust your repayments now to your expected repayments after refixing. This may be significant and adjusting your lifestyle now may put less pressure on at the time you refix.

*Consult your adviser or Bank first as T&C’s apply*


Note your refix Dates

2 months before your mortgage is due to refix reach out to your adviser. This gives you time to review your structure, explore interest rate options and potentially lock in a rate early without incurring break costs.



2023 is going to be a challenging year filled with opportunity. The role of your mortgage adviser is to support you through the process, helping you explore & facilitate your potential lending options.


Send us an email at admin@thelendingteam.co.nz to get started.


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