OCR Not As High But Market Still In The Woods

“The current market phase has got some way to go. The fact that the Reserve Bank was a little more dovish, than some expected, shouldn’t be interpreted as the end of the storm. It’s going to be a tough winter,” says Tim Kearins, Owner of Century 21 New Zealand.

Tim Kearins

His comments follow the Reserve Bank lifting the Official Cash Rate by 25 basis points, taking it to 5.50% - its highest level since 2008 when it reached 8.25%.

“We’re not surprised the white flag has gone up at 5.50% because that’s what the RBNZ has long forecasted the peak to be. The jury’s out as to whether this will be enough to help curb inflation, but it will no doubt be positive news for some mortgage holders looking to reset,” says Mr Kearins.

Last week Treasury forecast further falls in house prices and a slower rebound, with unemployment expected to peak at 5.3%.

The Century 21 leader says he wouldn’t be surprised if an OCR hike wasn’t revisited this year if inflation doesn’t track down as is expected. In the meantime, opportunities and choice for buyers this winter will be plentiful.

“There seems to be an inherent conflict between the Government’s actions and those of the Reserve Bank. Government spending continues unabated, with immigration strong again. Monetary policy could be relied on again if required,” he says.

Mr Kearins says while it looks set to be a challenging winter in real estate, many homeowners will be given some reprieve for now with interest rates possibly not hiking up as much as some thought.

“Today’s decision might mean a few less mortgagee sales, but let’s not forget every day mortgage holders are struggling to meet their commitments. Tens of thousands are set to reset on a much higher rate, surrendering their two or three percent rate from a couple of years back.

“While this move may surprise some, rest assured we’re not expecting to see a bounce anytime soon with vendors remaining realistic around price and time to sell,” he says

The realtor says last year the Government promised it would get slightly less prescriptive with home loan lenders, but stories from the frontline remain mixed,” says Mr Kearins.

“Here’s hoping banks’ assessments and stress testing of applicants starts enabling more Kiwis, who are a safe bet, to borrow. If not, that would only exacerbate any issues in and around the real estate market,” he says.

Tim Kearins says for borrowers it doesn’t all begin and end with the big banks. Mortgage brokers can often deliver more competitive rates and greater borrowing flexibility.

www.century21.co.nz

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