PHOTO: CoreLogic NZ
CoreLogic’s Property Market and Economic Update (Q2 2021) has found evidence that the property market is close to – or at – a significant turning point with slowing monthly gains even before last week’s fixed-term mortgage rate rises by the major banks.
The new data also shows a clear drop in market share for mortgaged investors and a rise in the number of first home buyers (FHBs) accessing the market.
Affordability pressures, the 40% deposit requirement and extended bright-line test for investors and tightening of interest deductibility rules are driving the change but rising interest rates will mostly impact new and recent borrowers.
Last week’s rate rises will see an average new borrower fork out an extra $1,800 a year in interest repayments, but should rates continue to rise to their long-term average, that same new borrower could be paying an extra $19k a year (or almost $60k in total annual repayments).
Kelvin Davidson, Chief Property Economist, CoreLogic NZ, says, “Those who have entered the housing market since 2014, the last time the OCR increased, have only experienced low interest rates, so the effects of a pattern of increases will likely come as a shock to many of those with a hefty mortgage, which includes many who have bought recently in Auckland and Wellington, the most expensive markets. For those still trying to buy their first home, interest rate increases will raise the bar to entry.
READ THE LATEST MARKET REPORT HERE: CoreLogic Property Market and Economic Update (Q2 2021)