As the weather cools, so does the market, and at the time of writing the Reserve Bank continues to put the freeze on with a 0.5 per cent increase to the Official Cash Rate (OCR) (from 4.75 per cent to 5.25 per cent) in the review on 5 April 2023. The Reserve Bank’s view is that inflation is still ‘too high and persistent’, but how much longer will the interest rate hikes continue? Nathan Miglani, Managing Director and Head of Lending at NZ Mortgages, discusses what lies ahead for the housing market.

The 0.5 per cent increase took many commentators by surprise – the general expectation was that there would probably be a 0.25 per cent increase. But, in reality, if that had been the case, there very likely would have been a second 0.25 per cent increase at the next review anyway. As it is, we’re now wondering what will happen next. If there is another 0.25 per cent increase, that may be the end of it – interest rate hikes, that is.

Many people are struggling with the increase in the cost of living and property prices have certainly cooled across the country (in some places more than others, as Christchurch continues to demonstrate a degree of resilience not shared by the other main centres like Auckland and Wellington).

There’s no doubt that if we are not at the peak of interest rate levels, we are very close to it. Which brings us to the question of when they will start to come down. Personally, I am hoping that interest rates will be reducing by the end of 2023. 

With that in mind, our general advice is to fix your mortgage for no more than one year. Of course, every borrower’s situation is different, so if your mortgage is up for renewal, or you need to refinance or restructure, we would recommend that you get in touch with a mortgage adviser to talk it through. If you have any concerns about making your mortgage repayments, do seek the advice of an experienced mortgage adviser as soon as possible. This is definitely a situation where it’s better to be proactive. 

If you are in the market to buy a home, on the other hand, this moment could be a golden opportunity. Bank lending is down 30–40 per cent, the biggest drop in decades, so there are lots of great offers from the banks out there to try and capture business from those who are borrowing. 

With house prices very realistic at the current time, and the likelihood that the LVR restrictions will ease slightly on 1 June 2023, the timing is great for those buying their first home, and those selling and buying will also find some tempting deals on offer.