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With wholesale swap rates at seven year highs, home loan rates push on up higher with ANZ the latest to raise fixed rates up to the next level

Personal Finance / analysis
With wholesale swap rates at seven year highs, home loan rates push on up higher with ANZ the latest to raise fixed rates up to the next level
raining rates

As the chart below shows, wholesale swap rates have taken off higher again, accelerating up faster. They are now at seven year highs.

And now banks are forced to respond with matching mortgage rates that are sharply higher too.

The first to move out of their uncomfortable position is market heavyweight ANZ, which now has no carded mortgage rate offers under 4%. We haven't seen that for three years, last in March 2019 for any bank.

Plus they now have rates starting above 6%. No bank has had any rate that high since August 2018.

Back then, rates were falling. Now we are just getting started on the rises. And the rises are coming quickly now. Don't forget we had a 2.90% fixed rate offer in the market just 120 days ago.

Not only have ANZ moved, challenger banks have too. On Monday Heartland Bank, China Construction Bank, and TSB all raised fixed rates.

Wholesale swap rates have been climbing relentlessly recently. And with US Federal Reserve policy rate increases now seemingly locked in the background policy rate direction is clear.

It won't be long before other banks join ANZ with rate cards that have a 6% set.

We should also note that ANZ has raised their term deposit rates sharply too. Most are up between +10 basis points and +30 bps in a steepening of the rate curve.

One useful way to make sense of these changed home loan rates is to use our full-function mortgage calculator which is also below. (Term deposit rates can be assessed using this calculator).

And if you already have a fixed term mortgage that is not up for renewal at this time, our break fee calculator may help you assess your options. But break fees should be minimal in a rising market.

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Here is the updated snapshot of the lowest advertised fixed-term mortgage rates on offer from the key retail banks at the moment.

Fixed, below 80% LVR 6 mths   1 yr   18 mth  2 yrs   3 yrs  4 yrs  5 yrs 
as at March 29, 2022 % % % % % % %
               
ANZ 4.45
+0.26
4.20
+0.21
4.55
+0.16
4.85
+0.30
5.15
+0.40
5.99
+0.29
6.09
+0.19
ASB 4.49 3.99 4.54 4.69 5.25 5.60 5.80
4.19 3.99 4.39 4.55 4.79 4.99 5.09
Kiwibank 4.19 3.99   4.55 4.79 4.99 5.15
Westpac 4.19 3.99 4.29 4.55 4.89 4.99 5.09
               
Bank of China  3.95 3.85 4.15 4.35 4.55 4.85 5.05
China Construction Bank 4.15 3.95 4.35 4.50 4.75 5.09 5.20
Co-operative Bank [*=FHB] 3.79 3.69* 4.19 4.50 4.75 4.99 5.09
Heartland Bank   3.49   4.05 4.25    
HSBC 4.01 3.95 4.29 4.45 4.65 4.89 5.04
ICBC  3.85 3.69 3.99 4.25 4.55 4.85 5.05
  SBS Bank 3.99 3.75 4.19 4.35 4.69 4.99 5.05
  3.95 3.95 4.39 4.55 4.75 4.99 5.09

Fixed mortgage rates

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Daily swap rates

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Source: NZFMA
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Comprehensive Home Loan Calculator

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106 Comments

Can we just go straight to 10% already? Why not just go all the way and crash the housing market?  Why the painful bleeding guys?  Better than doing 0.2% increases every month lol  So stupid.

 

Looking forward in seeing the economy & housing crash as well once interest rates are at all time levels, inflation keeps rising because of COVID supply constraints (not demand inflation). 

 

-7

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19

Its time to pay the piper.

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24

For some reason the title song to TV showThe Monkees is in my head. You know. “ Here it comes. ………..Hey Hey We’re the Monkees!” or something like that.

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2

Hey hey we're the Kiwis
People say we're clowning around
But we're all real estate agents
So nothings gonna make us frown

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5

Article should be retitled as "It's evaporating rate increases" because rates are going up, not down - silly billy.

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0

After initially stiffing the Pied Piper, the Mayor of Hamelin offered to pay extra to expedite the return of the town's children. In some accounts the children never return.

Given NZ's housing issues and the potential of an accelerated brain-drain.. the Pied Piper analogy is apt.

Perhaps it should be required reading for our politicians lol =)

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13

Once they get home from trying to flog their investment properties off to the children before prices fall they'll get right on to reading Pied Piper.

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0

People might need to check the definition of investing - what goes up exponentially can also come down just as easy when not tied to fundamentals. Prepare your brown pants -7

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13

Going down is only a problem if overly leveraged. 

If you have no debt it's not a problem but an opportunity. 

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10

Meanwhile at RBNZ, zzzzzz zzzzzz zzzzz. They only have one OCR meeting between the nov and apr meetings. A 0.5% rise almost certain now in the apr meeting, their inflation and emploment mandates are screaming at them. I have noticed the US and GB exchange rates look like they are fully expecting a 0.5% rise also.

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8

I was discussing with some friends over a weekend beer, when you look at the impending cost of climate change.. which is massive! there is a whole shite ton of potential inflation pressure out there.. nothing transitionary about it.  Add that to a stack of boomers who want to cash out and start using that cash to sustain themselves, spending money on holidays, services etc.  6% could well just be the start.

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7

This is actually a very good point.

I was thinking something along.

Right, some peps (how many?) will get out of this hell very well cashed. A bit like winning lotto. Newcomers in the ponzi are the ones paying the prize.

Depending on what that "how many" and "how much" it is we might have a very morbid inflationary side effects.

This is a real possibility, an ironic one, people leaving assets will devalue assets but also creating the conditions of higher ocr, which will devalue assets again.

this is going to be so entertaining to watch

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7

Some very effective regulatory capture over the last 20+ years, eh. These folk stand to live quite well off the wealth of preceding and succeeding generations.

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2

I take some issue with the "cost of climate change".  It's the brainless policies enacted in *response* to climate change that is the main cause of the cost increases.

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0

Process of halal has started - bleeding to death - slowly and steadily.

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2

7% interest rates this year guaranteed . - 30% Crash in homes Prices this year.

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19

For a true housing market price lets abandon rent subsidies, please

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8

Do you just keep posting the same thing everywhere, or is this a glitch in the Matrix?

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3

Its ok - because the banks were stress testing mortgages: 

Here's what you need to know about banks' secret mortgage test rate (article Aug 2020)

This test is done on principal and interest payments over a 30-year term at whatever their servicing rate is, typically between 6 per cent and 7 per cent

So we are fine...as I'm sure rates have now peaked with inflation firmly under control

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tounge firmly in cheek CapitalNone.........

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3

When interest rate was 3% or 4% and stress testing was at 6% imagine what the stress testing will. E when interest rate is actually 6%.

Many are still not able to u derstand the real implication and still trying to borrow in extreme, not realising as being blinded by FOMO ( Still many FHB are)

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6

In August 2020 banks were assuming a 2% inflation. Nowadays the domestic (=non tradable inflation) sits at 10% in real money terms. So you have to cough up 7% interest payments and a 10% increase in the cost of living in 2023 and beyond. 

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3

This has been one of my trains of thought the last 5-10 years....is when banks are stress testing, do they also consider that if interest rates are at 7-10%, that inflation is also much higher than the 2% we were experiencing....so its not just higher mortgage rates that are chewing up income, but that income is being chewed up simultaneously via higher CPI costs of living on a weekly basis.

Anyone in banking know the answer to this? Or was it assumed that CPI would always be at 2% in terms of weekly expenses, even if mortgage rates went to the highest end of the stress test component?

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I've been wondering that for years too. Do the stress tests for rates at 7% factor in the circumstances that would lead to those same 7% rates?

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and there is the first 1 year loan with a 4 in front of it.

hard to believe that only 9 months ago ANZ's 1 year interest rates were a full 2 % lower than today. Effectively a doubling in rates in less than 12 months

I predict ASB will go this week- last week we asked for a 6 month term deposit rate and they would only guarantee the rate until tomorrow and we would have to come in for a new rate this week - understandably we held off

 

 

 

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9

I had a 5 year fix in April last year for 3.05% with ANZ.  Traded up in December and refinanced for 4.95% for 5 years.  

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Why didnt you insist they transfer the original fixed term loan and the higher rate just on any increase.

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2

Because they insisted that I extinguish the existing loan which was tied to a property that was on the market but not yet unconditional/sold.  We were settling on a purchase before we sold our existing place.  

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Is this something banks are willing to do? We just signed a conditional SPA to sell our house last night. Looking to move from Auckland to Northland. I would like to keep the 3.00% for 5 years which I locked in around August last year. I was just about to message the bank but wondered if there's  a particular way I should go about it. Sale price $1.1m and the loan is about $530k. We don't have a new purchase lined up though so might be tricky but perhaps we could use the cash proceeds from the sale to secure the loan and keep it ticking over for a month or so until we buy something new?

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I would be surprised. The  banks always win, just like Casinos. One notes unlike Casinos it is the Banks TnCs that they can do what they like.

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Sure, I agree with that. We do have some leverage though as we might just choose to stay with parents for a while rather than buy again immediately in which case we would not take a new mortgage at all so it might be in the bank's interest to accomodate our request to keep us as a customer. 

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Llama, in my experience banks don't give a toss about keeping a customer, especially when rates are heading up. And I agree that if you want the right to negotiate you will need to borrow a substantial amount, which in most cases is of no benefit unless you have an investment plan that will bring in extra income on your property.

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Especially because when their risks go wrong they come to the taxpayer with their hands out.

Bail out should be for equity, not in handouts. Nationalise them if they come.

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Nope, it's all about Bail In now.  Deposit holders to the rescue.

 

https://www.rbnz.govt.nz/regulation-and-supervision/banks/open-bank-res… 

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You would have better negotiating power if you were increasing the size of your loan.

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I think you can swap your rate over if you have the same settlement date for the house you are buying as the house you are selling. 

Having a longer settlement date now, helps with this

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Looking at the TD rates, it looks like the ASB is lagging other banks

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2

they are using FLP instead, but ends dec

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0

Heads: We win

Tails: You loose

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1

Just looking at the 1 year fixed mortgage rate low to high is (2.16% -> 3.81%) That's a 76% increase.  That ain’t nothing!  About a year ago my girlfriend in Germany fixed a 5 year term at 0.6%, now the same rate is 1.6% so that's a 167% increase.   That sounds bad but consider the actual nominal increase on a 200K loan.  Interest payments are currently 1200 euro per year and after the increase they'd be 3204 euro,  pfft who cares.  Besides the mortgage is fixed for 5 years so just relax.  Pay it off in full when it comes to term.  Housing market hasn’t even flinched.  Are interest rates so low that increases don’t matter? or are we blissfully unaware of a coming calamity?

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In NZ it is not from 0.6% to 1.6% but from 3% to 6%. Check with her what happens if in Germany interest rate touches 6% and that too not on 200k but on 800k

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 0.6 to 6 would be a 900% increase.  That's about as likely to happen as time travel.  The flip side of low rates are oddly picky banks scrutinizing loans that would have been issued in a heartbeat in NZ.  I know what you mean though.  NZ is quite a different animal.  Million dollar loans on short fixed terms and scary high interest payments in nominal terms.   

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"Cost of the house in Germany in 2021. The typical home price in Germany is around 320,000 EUR. On average, people spend about 354,000 EUR on buying a house" Germans don't have 800K mortgages. They are not obsessed with property as in New Zealand and use their combined savings mainly to create products which add value!

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6

Yes. NZers still haven't quite grasped that our house prices make no sense at all. It's as if buying a packet of chips cost hundreds of bucks, and we all just kept buying them, oblivious. 

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4

It's been a manipulated, subsidised, and tax-exempt speculative market for years now. So many in parliament and government have made a mint from what they've overseen.

We shouldn't be surprised our prices are so out of whack.

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2

With swap rates' relentless rise and the banks' NIMs at an all time low, it was just a matter of time until interest rates rose and there is more to come. 

Not good for property prices, jobs or the whole economy in general but better than losing control of the  inflation runaway train

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15

We cant let it drop right? Because it will be bad for the economy! Sounds like a bull version of DGM..

I don't see it as bad for the economy as a whole.  Those the make a living clipping the debt ticket should be worried, anyone over-leveraged perhaps, But house prices can wipe out 50% overnight and the sun will still rise.  Corrections are healthy for any market.

And it sure as hell will help a lot of people in now in their 10's, 20's & 30's who are locked out of the market and on a hiding to nothing.

We need a little blood right now.  Come on.. it will be fun!

More to the point Astute investors have been preparing for this eventuality.

The vulture calls... its a great time to be debt free! KAAAARKKKK!!!!

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11

Amen to that. Kaaarrrrk indeed.

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0

Kaaaarrrrkkkk - word of the year 2022?

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Yes indeed, Kaaarrrk, what a wonderful, eloquent word, it really makes one's point a in such an insightful way (sarcasm).  It says a lot about the author.

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2

Bit like the continuous use of the term doom gloom merchant - which used to offend other people, is often more a description of the authors/originators view of the world.

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5

Indeed, that's why I don't use these terms

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Economy can be be manipulated but ultimately fundamentals have to catch up.

 

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OCR increases will be interesting to see how fast they rise , given our RBs reluctance to upset housing. Can't ignore inflation for to long , bit inconvenient for the RE industry,  and spec sellers . May bring a bit of a rush to market. 

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6

Wow, this must be a record for the number of good news stories relating to spruikers in a given day

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4

A short time ago I would have bet that the upcoming MPR next month would just be a continuation of the same old “wait and see” rubbish from the RBNZ. However I now think we may be in for a surprise. The pressure is now huge for Orr to make a move and with his rumblings of late I feel at least 50 bp is on it’s way.

I think the RBNZ and the Govt have both sent enough subtle messages out in recent weeks that whatever happens now they can say, “We warned you”.

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12

Why muck around let us say 0.75 increase will save time in the long run. Upwards and onwards whoopee.

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0

This housing market will be on way down for a number of years people who have a million dollar mortgage will find the payments hard to keep on top of add inflation and seeing deposit gone and in negative equity some people will just sell at loss and over leveraged could just go bankrupt say goodbye to speculators and hello to a place where average wage earners might be able to purchase a house.

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18

Straylia's looking good again 👍

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4

The margin-based 1929 stock market crashed when Lord Montagu Norman, Governor of the Bank of England raised the rates 0.25 % to 6.25 %

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4

Very interesting historical note. History never repeats...oh wait, it does.

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1

Here's an interesting analysis on margin debt that only a few days old

https://www.yardeni.com/pub/stmkteqmardebt.pdf

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History only repeats when it suits spruiker narrative, of course.

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The ones who are are already feeling it right now are those that don't have 20% equity in their property and don't qualify for these 'low' rates e.g. your average FHB. They'd already be pushing on 5%-6%+ atleast... No doubt when many bought recently they'd be under the impression their equity would grow quickly and they'd qualify for lower rates...damn.

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Good points. Tolerate higher interest rates for a little while, until equity bolstered and re-mortgage at a more competitive rate.

Not. Going. To. Happen. 

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3

In all honesty it sounded almost convincing 12 months ago, after seeing RBNZ unwilling to suggest house prices would drop, and commenters telling us that low interest rates were here to stay. 

But some of us said or felt that NZ will always follow the rest of the world, and rates increases off shore will always be echoed here.

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4

fantastic time to be debt free.

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24

Fantastic time to be leveraged, but not overleveraged I think you mean.   Inflation is going to eat my debt. 

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6

Only if it's monetary inflation, which is not measured by the CPI.

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3

Indeed, keep your eyes on wage inflation stats, they are going to start catching up to CPI. 

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And the market will eat your equity.

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Only temporarily until wage inflation kicks in enough.

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3

Not looking to leverage the equity, and living in the house so really not caring about the paper value of the house coming down from the silly number it currently is.  

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0

Trust me debt free and money in the bank trumps everything. 

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5

amen to that!

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'Trust me debt free and money in the bank trumps everything'

Carlos67, it would with a deposit guarantee scheme. Which NZ still doesn't have.

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1

Nah..Debt free and owning BTC 

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Heh, if they honor the rate they quoted my car loan will be at a lower rate than the same term fixed mortgage.   Guess I won't be rolling the car loan into the mortgage come refix time. 

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0

I got 0% on a Subaru Forrester 2 years ago, paying it off late this year. 

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I got 0%

You might think you did...

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10

Sorry to hear that HM

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Why?

Because it's not a Euro car?

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0

Sorry to you both...for still owning ICE cars

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2

Wow, could you be more obnoxious? 

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4

Those that can afford to put gas in the tank don't care what they drive, they still have a choice.

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Not at all HM, Japan cars are fine, I said sorry because you got into debt for a fast depreciating asset

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10

... like real estate, lol ;-)

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3

I really appreciate the perspective given in these articles; how long it's been since we saw anything like X, what was happening Y years ago. It's hard to gauge the significance of changes like these without it.

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3

Remember though that it takes time for retail rate increases to propagate through the economy as typically mortgages will be on a fixed rate agreement. No doubt though the very low inflation environment that previously existed won't return any time soon, it's long overdue that team transitory concede this and set appropriate rates.

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0

Rising interest rate = slow death but the speed with which interest rates are rising will be doom for over stretched property speculators and even FHB who have borrowed in extreme.

Five years interest rate has almost doubled from 3% to 6%. For every $100000 borrowed for 25 years earlier at 3% was $109 per week, at 5% is $135 and at 6% ( currently on 5 years term) is $149 per week that is appox 35%Jump in mortage.

For $700000 loan it is a jump of $280 per week from $763 per week to $1043 per week and this is just the beginning of rising interest rate and is much more to come,  being forced by inflation and economy fundamentals.

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5

Watch the emergency housing list go through the roof.  Long term landlords will dump their properties and will need vacant possession as no investor can buy with high interest rates and no tax deductibility.

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1

How dare they allow that to happen. Maybe they will start attending the local IA meetings(investors anonymous)

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2

If we are lucky, falling house prices will flush out a lot of houses that have been sitting empty (Gareth Morgan style, "tenants just wreck the carpets")

As prices fall, there will be less incentive to hoard empty houses  and hopefully they will come onto the market to be used as rentals/OO.

Rising house prices didn't help the emergency housing waiting list to reduce.    We can only hope that falling prices will.

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4

That'll be the interesting thing.  The properties are taken away from the market, so the market reacts by replacing the stock.  

 

All of a sudden "Why hello there, did you miss me?"  

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Not sure what conclusion you can draw from that other than house prices are much too high and need to fall in price to match the state of the economy.

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Don't worry, investors will return to the market. We just need house prices to fall to a level that rental property makes sense again. 

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Fixed for 5 years at 4.95% earlier this month and off to grab the popcorn :) Came off a 2.29% rate so it felt like a slap to the face, but better than several punches

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2

Feeling mighty fine about our 40/60 split on 3/4 years I locked in August last year. Got 3.24% for 3 year and 3.55% for 4 year after enjoying the 2.2% 1 year special for nearly the full year. 
 

 

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welcome 6, how far behind is your friend number 7.

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Pretty clear the 8's are coming back. Will start in the 5 year and trickle down the longer this inflation goes on. 8% by this time next year judging by the current speed of the RBNZ to do something.

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3

It is going to depend on the US Fed. 

 

They have penciled in 7 raises this time to their rate (this year). That will mean 7 more for us, at least, plus more to subdue inflation. If they raise 7 times and we also do, that will add almost 2pc to the OCR. We are going to have to go higher again to subdue inflation, otherwise our dollar will crash and we will import yet more inflation. 

 

Expect rates of 10% if not more at peak.

 

 

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Margin call.

Do property investors hedge their portfolio? I very much doubt so.

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Hedging means buying investment properties in different suburbs.

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3

Hedges are such high maintenance anyway, better off with some native grasses.

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Nah hedges are great you just get the natives to trim them for you.

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