Many home owners face a steep interest rate rise

Unfortunately, many people’s home loans will soon reach the end of their record-low fixed rate period and receive a significant interest rate increase.

In late October, ANZ’s chief executive Antonia Watson said there were dark clouds ahead for the country’s economy. She commented that about half the bank’s customers with home loans were still on interest rates of 2 or 3 percent, but they would be paying more over the next year or so.

At the same time, house prices are falling and housing stock is increasing

In recent months the higher interest rates and gloomy economic forecasts have reduced buyer demand and house prices are falling significantly. There has also been an increase in housing stock availability, as listings linger longer on the market. These trends are good news for first home buyers and people wanting to buy an investment property. It means home loan repayments are actually coming down.

Using a median price for a first home in New Zealand and the average one-year fixed interest rate, Stuff’s housing affordability dashboard showed the fortnightly repayments have dropped from a peak of $1480 in July to $1387 in September (2022).

With house prices falling, so are the deposits. Based on median household earnings, Stuff’s dashboard showed the time it would typically take to save a house deposit decreased by nine weeks to 248 weeks in the same two-month period.

Want to help your children or grandchildren into their first home?

If house prices continue to fall faster than rising interest costs, things should continue to get easier for first home buyers. In September, first home buyer activity increased slightly to reach 24% of successful home buyers.

All things considered, now could be a good time to help your children or grandchildren into their first home. But whether you want to gift them money, become a part-owner of the property or act as a guarantor for their lending, strategy is everything.

A smart first step is to get some trusted professional advice on what’s happening in the market, the latest home loan lending criteria and the various ways first home buyers can get help from family.

An Apex Advice home loan adviser makes it easy to get all the information you need from one independent source. Your adviser can help you to make the most of current buying conditions before prices start to rise again.