If you are looking to buy a house, then chances are you’ve read some of the latest headlines spouting doom and gloom around the housing market. Prices dropping, interest rates rising, and talk of negative equity. But the truth is when you look further into it, things aren’t nearly as bad as they seem.
Over the next four to six months it’s estimated that 45% of Kiwi mortgages are set to roll off lower interest rates. Some of these could nearly double when refixed, which yes, will be a shock for many - but still manageable. Back when the banks were lending at 3%, they were still qualifying borrowers at test rates of around 7-8%, and only lending to those who could repay at this rate. So for those borrowers that could get a loan then, as long as their circumstances haven’t drastically changed, on paper they should still be able to pay their mortgage.
However what this does mean is people may need to tighten their belts a little when it comes to how they spend their money. Since their mortgages will be taking up more of their disposable income, there will be less to spend on things like takeaways, entertainment and the like. Current low unemployment however, means people are in a good position with their work and jobs and are less likely to lose their income stream.
If we look at falling house prices, this was bound to happen eventually and it is only those who bought on a high and are forced to sell now who will be affected. If you purchased a home last year and the price has dropped dramatically, you only lose out if you do choose to sell. So our advice? Sit back, ride the wave and continue to repay your loan.
For those looking to buy their first home, now is a great time with the house prices low and the selection high.
For those looking to buy and sell in the same market, they are doing so on an even playing field. While they might not get as much as they hoped for their home, they are also paying less for their new home (assuming they are moving to a similar location)
While it’s easy to feel the doom and gloom of the housing market right now, there are also a lot of positives. The truth is there is really never a “perfect” time to buy, however by getting the right advice you can be certain of your choice and options.
If you are looking to buy a home, prepare for a home loan, or refix your mortgage, get in touch with our team for honest advice and guidance through making one of the biggest purchases you’ll ever make!