OCR Up But Other Factors In First-home Buyers’ Favour

“Sure, the Official Cash Rate is up again, but for first-home buyers it’s not all bad news. There are plenty of other factors at play which will help them this winter,” says Tim Kearins, Owner of Century 21 New Zealand.

The Century 21 leader’s comments follow the Reserve Bank (RBNZ) hiking the Official Cash Rate (OCR) by 50 basis points to 2.00% - the highest it has been since September 2016. The move marks RBNZ’s fifth consecutive hike since October last year.

“Even with this latest rise, let’s not forget that interest rates remain below New Zealand’s historical average of about six or seven percent. What’s more, with house prices softening and a lot of supply coming on stream, first-home buyers will be presented with plenty of good opportunities in the coming months,” says Mr Kearins.

The realtor points to the Government’s promise that changes to the Credit Contract & Consumer Finance Act (CCCFA) in June will help more applicants secure a mortgage.

Most notably, he says, Budget 2022 delivered more New Zealanders access and support to get into their first home thanks to changes to First Home Grants and First Home Loans.

“It’s good news for first-home buyers that the Government is increasing the house price caps for the First Home Grant and has now entirely removed house price caps from the First Home Loan. That will enable thousands more Kiwis to realise their homeownership dreams, and give the entry-level market a timely boost,” says Mr Kearins

From 1 June, house price caps on First Home Grants will be increased in most major cities, including Auckland (from $700,000 to $875,000), Hamilton ($600,00 to $725,000), Tauranga ($600,000 to $875,000), Wellington ($650,000 to $925,000), Christchurch ($550,000 to $750,000) and Queenstown ($650,000 to $925,000).

“The changes are a relief for many weary first-home buyers who’ve felt locked out of the property market. They are long overdue and better reflect the reality of the housing market as well as give buyers more options over types of houses. We’re also pleased with the new six-monthly reviews on the house price and income caps,” says Mr Kearins.

The Century 21 boss predicts with these considerations in play this coming winter, many tenants sick of paying record high-rents will be turning to the mortgage calculators, seeing if they make it work.

Trade Me’s latest April Rental Price Index has revealed the national median weekly rent grew by seven percent when compared with April 2021. It is now $580.

“Most first-home buyers require a 20% deposit which is not easy and banks’ mortgage serviceability assessments remain tough. However, there are mortgage brokers like Julius Capilitan of Century 21 Financial who can deliver competitive rates and greater borrowing flexibility than traditional banks. Brokers are well worth a phone call, and in many cases make all the difference,” he says.

Mr Kearins says with RBNZ signalling further OCR rises this year, it makes little sense for buyers to sit back and wait, thinking it’s going to get cheaper to purchase a house.

“Often, it’s more cost effective to buy at a higher price with a lower interest rate than the other way round. While it’s not a buyers’ market yet, it’s certainly a more balanced and calmer market with many doors opening for first-home buyers,” says Mr Kearins.

www.century21.co.nz

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