Let's Talk About Interest Rates

The last five years have been extraordinary to witness as the Reserve Bank has managed interest rates while trying to minimise the economic impacts of world events.

House Prices

House prices peaked end of November 2021 before we saw a big decline in both values and sales. In Hawkes Bay as of July 2021, the annual number of house sales was 2,763 whereas this July we saw annual sales of 2,181, an increase from the low of 1,879 in early 2023. Alongside this, the nationwide median house price is down $160,000 sitting at $765,000 as of August 2024 compared to $925,000 in November 2021.

There are a couple reasons for this decline. Leading factors are of course the economy and the recovery following the 2020 pandemic where we saw interest rates plummet to as low as 2% and inflation reach 7.3%. This created what you may hear as the 'housing boom' sending house prices up as our population rapidly grew and demand soared with new buyers maximising this opportunity. However, these are conditions that steered us towards a recession. With the cost of living heightened, the Reserve Bank of New Zealand put the brakes on and increased the Official Cash Rate (OCR) to help ease inflation. This sent interest rates up into the 7%'s, creating a decline in house prices and purchases as Kiwi's eased out of the market while costs in other sectors remain high.

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Interest Rates

To homeowners delight, interest rates are back to a declining nature as the Reserve Bank has started to decrease the OCR from it's peak at 5.5% where it previously remained for over a year. The OCR is currently sitting at 4.75% with more decreases expected to come. Along with this, lenders have also started to ease policy, making it more achievable for buyers to purchase. This year alone, we've seen changes to Debt-To-Income (DTI) rules as well as easing on CCCFA policy. These are all aiding in bringing buyers back into the market which is likely to increase house prices.

It is important to note that we are still in a recovery phase with no set prediction of what will happen in the next 1, 5 or 10 years. There are still a lot of factors contributing to our market such as conflict overseas, the upcoming US election and movements as countries make changes as they manage their own inflation. That's why we can't recommend more speaking to an expert or researching before your next property purchase or fixed rate rollover.

We hope some of these tips are helpful and have got you thinking about how you can adjust your finances to decrease your loan term. If you'd like to know more about these options or are looking for assistance with your lending, please don't hesitate to get in touch.

Looking forward to hearing from you,

Fiona & Amy