ANZ expects one year fixed mortgage rates to bottom out at 1.75% in April, but says their impact on the housing market could be muted

ANZ expects one year fixed mortgage rates to bottom out at 1.75% in April, but says their impact on the housing market could be muted
Photo: Vincent van Zeijst

ANZ Bank's economists have warned that the current strength in the housing market might not last, even though mortgage interest rates are likely to fall further.

ANZ's latest New Zealand Property Focus report notes that the housing market has been surprisingly strong over the usually quieter winter months, supported by lower mortgage rates, wage subsidies and pent up demand.

But it also warns that factors such as weak migration, the economy coming off fiscal life support and a generally weaker economy, could take longer to dampen the market.

"Short term fixed mortgage rates could dip below 2% next year," the report said.

"Further declines in mortgage rates will help shore up the housing market, spending and confidence.

"But that's set to go up against a range of dampening factors that are likely to become more evident by year end.

"Because of this, we expect that lower mortgage rates will provide a cushion, but won't propel the housing market significantly.

"We may see the winter heat replaced by a summer chill," it warned.

And that chill could settle in for a while.

"Although supportive factors have affected the market quickly, dampening factors are set to weigh more gradually, but persistently," the report said.

However, the report also said that the exact path the housing market would take was uncertain.

"Increasing income strains and weak migration are expected to see some wobbles start to affect the housing market later this year and into next," the report said.

"However, lower mortgage rates will provide an offset and the exact trajectory for the housing market is uncertain."

The report also said ANZ's economists were expecting the one year fixed mortgage rate to bottom out 1.75% in April next year.

The report said the best strategy for anyone taking out a mortgage would likely be to fix for one year.

"Over a one year time horizon, it is likely to be cheaper to take the one year fixed rate of 2.55% [the current rate] than to take back-to-back six month terms," it said.

It also said there was limited appeal from a cost perspective for 2-5 year fixed rate mortgages, even though they offered advantages in terms of certainty.

"That's because the RBNZ has flagged that the OCR will not go up for years to come, and because it is readying a Funding for Lending programme with the express intention of lowering retail interest rates.

"Basically, the RBNZ's message is that it 'has your back' if you're a borrower, so there is less reason to fix to protect yourself from rising interest rates, because they are less likely to rise anytime soon," it said.

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65 Comments

25
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"Basically, the RBNZ's message is that it 'has your back' if you're a borrower, so there is less reason to fix to protect yourself from rising interest rates, because they are less likely to rise anytime soon," it said.

Yet it can't guarantee my savings will not take a haircut? Seems legit (sarc).

19
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No reporter seems to be able to pin Orr or Robertson down on a deposit guarantee? Why not ask them on live TV you are putting in place every measure to support the debt fueled but they NEVER breath a word as to what they are doing for deposit holders? You have screwed them all with zero interest rates. Just constant BS of be bold and lend and put deposit holders at risk of an OBR event. I have moved large deposits out of ANZ since 31 March. Some to the US in an account with a federal deposit guarantee and some to kiwibank and some to ASB. Since the US implemented the federal deposit guarantee it has cost the US tax payer nothing. This and housing should be in political debates but is conveniently avoided. Sick of the bailing out of the debt fueled.

Only late last year Orr is Hawkish about Banks CAR, LVR, asking govt to get some sort of DTI & TD guarantee, then ask Kiwis to spend, spend, spend. Then came Covid, US & OZ went gung ho first, Orr said he won't do the knee jerk reactions. The rest his history, it's race that he planned to win timewise against 'Biological disruption' worldwide, QE upon LSAP, negative rates threats, FLPs. He's banking on 'normality soon to be restored, post Vaccine'. My advise to all? if you got cash, go converted to more stable currency piggy back to countries that willing to take a bitter pill of medication for economic illness, plan to use it to buy foods for survival, you can't eat the bricks or take it out & put it with Bank that support productive economy (but don't put it as TD), you knew which bank I meant.. nope Not those 4 OZ banks at all that have large exposure to RE - the looming OBR is for those that exposed too much in speculative, non-taxable, inflation hidden parameters. Those touted that NZ is export based economy here in this website, did not fully aware which bank/s that really operates in NZ but not giving out too much lending on their book into non-productive consumer credit such as car loan, 'productive home loan'

Albert / Oreo / Pusheen, I agree with many of your points.
I used to have a significant portion of my savings as term deposits with NZ banks. I have been taking my money away from all NZ banks in the last few months, and diversifying away from NZ bank deposits as quickly as I can. I am planning to leave very little, and only as on-call savings, with NZ banks.

I would personally recommend that savers take away their money from NZ banks, as it is just not worth it: why would anybody subsidize risk-taking ans cheap debt-fueled speculators, for a ridiculous return of 1.00%, and with no deposit guarantee?
It just does not make any sense.

If depositors did this en-masse, then they would not need to worry about an OBR event any more, and observe from the outside what would happen with the NZ banks going below their prescribed core funding ratio. The RBNZ is counting on the depositors' inertia and hoping that most of them will be ready and willing to be shafted to keep the housing Ponzi scheme afloat for a little longer - well, not with my money, thank you.

Agreed. Have been doing the same. When the NZD recently hit 0.67 to the USD I moved a lot.

Oreo - what did you move it into (if you mind me asking and you sharing)?

I've got money scattered around the globe in various investments, but I really don't see much that offers potential (risk/reward) at present...

I used TD Ameritrade in the USA - listed on the Nasdaq. They were already my broker for stocks and bonds before Covid. They give you a federally guaranteed account but only on cash up to US$250k. But it also allows you to buy into any US bonds, stocks or low cost index funds such as Vanguard VOO (S&P500) that only charge 0.03% that yields about 1.75% dividend but this is a FIF for NZ tax if you invest over NZ$50k cost. Funny enough the NZX Smart Shares US500 fund puts all there funds money in VOO and charges you 0.46% to do this (another total con for NZers). I do this full time and there are opportunities out there at the moment (Altria - formerly Philip Morris paying 9% dividend yield and Exxon Mobil over 10% as examples - I am not recommending these to anyone unless you understand risks and analyze it yourself). I invest directly in a number of US stocks plus VOO. I am looking at some Australian options via ASB Securities that are not FIF investments so no capital gain and only dividends are returned but focus solely on the US markets 99% of the time. When the US market tanked in mid March I was buying a lot. Not so much at the moment.
You can also do similar with Kiwibank's hatch also.

Albert
Agree with it or not . . . but RBNZ who are charged with ensuring economic stability (along with other things such as inflation targets) is of the opinion that a stable to strong housing market is likely to ensure that homeowners have a sense of greater wealth and therefore propensity to spend for economic stability.
Of course, there are winners here . . . and some that are not.
Bottom line that is currently the playing conditions . . . one can adapt to it or bury ones head in the sand. That is a personal choice.

And by "adapt" you mean to follow the lemmings?

Yes gear up and buy more houses.....they double every 10 years

yep and pay no tax too, its cool!!

Exactly
Slowly but surely some of you doomers are learning
No charge, consider it charity :)

ANZ is launching a new marketing campaign "NO PAYMENT NO PROBLEM"

The campaign will evolve and in March 21 it will become "NO DEPOSIT NO PROBLEM"

By Sept 21 it will become "IF YOU HAVE DEPOSITS YOU HAVE A PROBLEM"

Maybe for the time being, but if new entrants to the market are having to spend 40-45% of their income towards a lower quartile houses (and can only assume this percentage would have to keep increasing as house prices outpace income growth), people are going to have less and less disposable income and propensity to spend.

If or when the deposits start leaving the banks in volume, the deposit guarantee will come in like lightning.

During the lock downs they made it hard to visit the bank to get cash out in big amounts. Also refused to sell foreign currency in cash.
Now they have limited branches in cities. Recently when in Wellington ANZ only have one or two branches open in the entire city all others shut. Even main branch in Lambton Quay is shut. Walked to a number of them and found them all closed recently as had to something over the counter.
Also they are pulling rubbish like this https://www.stuff.co.nz/business/money/122835522/banks-wont-accept-cash-...

Go be smart & quick OC, us as a couple both average in stable good salary, enough cash to secure approval for higher ends of the market. But we're decided that the smart move, is to shift to OZ. So waiting for the border to re-open. Before it's too late/being limited, quick open up an account with a Dutch conglomerate bank then do transfer quickly between those OZ Banks, don't put into TD, put some into FX. The rest in this website advise of propping up the market surely for a reason, including the govt & RBNZ.. 'Confidence' can be at crisis point, when all the levers being put into action but no longer effective, sign of it? is 'a disconnection' between all those parameters.

i went past an anz yesterday and there was a line at least 12 deep standing out side waiting. it was insane.

They are going digital, cashless is coming. Covid used as an opportunity.

No more cash notes..coins.

Nope NZ will go digital to prevent a bank run and you will have a short time to get your cash in the bank before its worthless.

This article will make many happy. ANZ aren't so bad after all in trying to pump up the property market. :)

It will be interesting. Lots of "Covid winners" out there who purchased August 2014 - July 2016 (700,000 in just two years - RBNZ), who will be paying mortgage rates 4% less than initially, have lots more $ in their pocket and unlikely to be able to travel, and have seen their houses increase by around 50 to 60% (their $ equity considerably more), so pretty pleased with property and will be in position to looking to take a step up the property ladder to buy that better home.

*Shrug*. I suppose you have a point, a 60% increase in a property at 15% starting equity is a quadrupling of their deposit, so those gains can be realized into the next step.

$600k house with $510k mortgage (15%). + 60% = $960k house with $510k mortgage ($450k in equity).
Step up property was $800k. + 60% = $1.28 mill. $450k = 35% deposit.

Yes and no. The increases also mean that the size of the step seems insane, even if you have loads of equity from those increases.

Hence *Shrug*. Still need to borrow up large to plug that gap.

Nzdan
You will know that having purchased three years ago that you are a "Covid winner" - house has increased in price and mortgage interest down (already by probably 2% and likely 3% next year).

Would really liked you to put a list.. as to whose the 'winner' or potential winner and whose the 'looser' or potential looser, in this world full of interdependency, where does this leads us? .. so far we're at the mercy of those low wage workers, being instructed to be kind during this Covid19 lockdown rules.. not many of them work as low wage workers, if they are already a property moguls.. which is raise a questions what happened if those masses decided to no longer be kind? flaunt the lockdown rules etc. You may need to exercise the same caution that actually have came out from the 4 OZ banks & even RBNZ recently.. but wording it as longer cautionary, rather than prop your current bias?

Could also retire to Greymouth freehold and have couple hundred grand in your pocket
Or keep investing, the point is you now have some more options

Greymouth is about as much an option as slitting your wrists

"the RBNZ's message is that it 'has your back' if you're a borrower, so there is less reason to fix to protect yourself from rising interest rates, because they are less likely to rise anytime soon".

Set against that the old saying (Mark Twain): It ain't so much the things that people don't know that makes trouble in this world, as it is the things that people know that ain't so......

well it’s complicated and confusing, he also said relevantly, something like if you don’t read the material you are uninformed and if you do read it you are misinformed. hard to know these days what point of the compass will give a true bearing.

While I agree with the downsides highlighted the downsides, prices have been rising regardless. Fundamentals went out the window some time ago and commercial reality has not kicked in. Central bank policy spraying cheap money everywhere had buried normal fundamentals

Do have a workmate working on a new mortgage atm and getting the third degree. Will reality ever actually arrive?

If we have negative swaps rates at 7 years and only a little higher at 10 years why arent the banks introducing very low priced 7 ~ 10 year fixed rate deals ?

11
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Predictable propaganda from ANZ. Full of moderating language with a few hooks. Not too hot, not too cold. Give me my 3 mins back.

There is property that is your home and then there is other property. For the former, in the event of a crash, those that have sensible equity and an affordable mortgage and solid income, history says will be relatively unscathed. Have friends in the UK who twice have had their home property values collapse to not a lot more than the mortgage. They still live in those houses, have done so for well over twenty years & the P & I mortgages are almost done. Just stuck to the their knitting. What crash?

If there is a hard landing and interest rates are suppressed why would you sell your family home? Even if you lose your job 1.5% interest will likely be better than renting. And I think that is the next step. Pretend and extend with a lot of loans turning to be interest only. That will help stop a rush to the exists.

Because if you lose your job it will be the bank deciding whether to sell your family home.

Normally, yes. But if the rbnz continues on by saying that you don't need to recognize delinquent loans that changes.

There will come a time when the shareholders want their interest paid and principal back regardless of what the RBNZ says...
News in Australia: Australia's NAB urges high-risk clients to sell homes soon By Paulina Duran
* Credit impairments surge, Q3 earnings fall 6% to A$1.55 bln
* CEO urges customers to consider selling instead of waiting
* Australian home prices down, but still up from last year
* Sometimes better to sell early and take equity - CEO (Recasts)
https://www.reuters.com/article/nab-results-idUSL4N2FG06O

Foxglove, agreed as your example proves - provided FHB are prudent, have job and income security, and prudent by starting to pay that mortgage down they have little to fear from short term fluctuations.
Unfortunately there are many on this site who can't grasp this.

"Have job and income security". Say that again. Reality is many do not.

Following reality should then be no loan forthcoming.

Yeah. I kinda think everyone's winging it these days. Banks, no less so.

If looking at Australia as "Canary in the coal mine" for NZ's housing market (in fact it's bigger than a canary, it's huge Emu". This is another prediction:
https://www.brisbanetimes.com.au/business/banking-and-finance/bank-of-qu...

Moa
Heard this many times in the past comments that the NZ market is going to follow Australia (usually claimed only when Australia is falling). Didn't happen when claimed in 2018 and 2019. Big difference was the migration "property driver" in NZ - about twice that of Australia per capita.
Despite plenty of occasions we are compared to USA and Ireland, what happened in those two countries didn't happen here during the GFC. No sub-prime mortgages in NZ as for USA and more restrained lending than Ireland. .
So, just as the Queenstown market is currently different to Auckland, so too is NZ to Australia.
Far better to look at NZ (and specifically Auckland, Queenstown . . . .) drivers rather than making casual links to other countries.

13
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It's ironic that when things are rosy in Australia (Sydney), people often referred to it as leading indicator. But when thing are gloomy.. yeah nah, we are duffrurent!
We, Australia and NZ serve the same mainland master!

Donald Trump tactics - just change any data to fit whatever narrative you want make as propaganda to fit your own self serving bias.

It's sooooo gloomy in Australia, I mean it must have devastated the owner only getting an additional $10.6m over what he was prepared to sell it for.

https://www.domain.com.au/news/sydney-auctions-vaucluse-house-smashes-au...

Would you like some apples with that cherry? lol

I know Lolz, they buyer should have read your comments about house prices.

Just as the bank said:
"Further declines in mortgage rates will help shore up the housing market, spending and confidence."

What can one say, it's the expected outcome? - regularly cutting official interest rates in half offers up a higher discounted present value of future asset cash flows waiting to be capitalised by the already wealthy minority.

Unfortunately, the majority are left with rapidly rising liability costs, while interest rates approach zero, far beyond the returns accruing from their asset deficient households and poor incomes.

I am not looking forward to see my taxes rise to bail them out with so called "Helicopter Money"

..... and the exact trajectory for the housing market is uncertain."

Exactly as is not in line with economy. I guess if unemployent does not rise into double digit and business does not opt to shut down resulting in econony recovery as now many are expecting than Housing market and Stock market will maintain their Bull run but if not that may have some rough ride.

Not to forget that also should not have another wave of corona virus though doubtfull but cannot rule out.

Is it possible there is some sort of affordability ceiling being hit on the areas that are flat? Some areas have not increased in values in the last year and I wonder why. Maybe the banks have worked out that the reduced mortgage rates can only lift it so much higher because of the ceiling. I have no idea just a theory.

The only solution to break the ceiling is 100 year mortgage issuance - pass the extraordinary principal liabilities, beyond the parents' capacity to extinguish, to the children - happened in Japan. The road to perpetual serfdom.

Next they will unveil government backed 30 year fixed rate mortgages ala US model and offer them exclusively to non residents as a condition of residency. Automatic citizenship for anyone who buys a house and rents it out.

"However, the report said the exact path the market would take was uncertain."

This ANZ prognostication could be reduced to this one sentence. The rest of the article is padding, stuffing and verbal polystyrene packing.

Remember that the definition of an opinion is: 'a belief held on grounds short of proof'.

Lyndon B. Johnson Quotes
"Making a speech on economics is a lot like pissing down your leg. It seems hot to you, but it never does to anyone else."

ANZ is a bunch of sookie babas! So much negativity and doom & gloom, can't they find something in life to be happy about?

Yes I'm surprised that the RBNZ weren't being labelled as DGM's when they said that house prices could fall by 50% if we had/have the same level of unemployment as the US. We keep getting told they are a most trust worthy source of economic modelling/information - so how dare they come up with such scaremongering. I get abused for being a DGM for saying such events are a possibility - while being told that I should listen to the forecast of the RBNZ. Yet when they agree with me that its a possible outcome - I'm still not worth listening to/views must be dismissed! But one just needs to remember that only positive outcomes for the housing market are allowable economic forecasts. So my bad....

https://www.stuff.co.nz/business/122796046/house-prices-could-halve-in-v...

Another view by average YouTuber on Australian housing

https://youtu.be/59BdKb0pGak

I say if you're in the position to do it - leverage yourself to the eyeballs and call their bluff. If you owe them a million, you have a problem. If you owe them 100 billion, they have a problem.

ANZ admits summer cooling as likely as warming
Not gung-ho usual is it?

I'd like the that title: heat during winter & chill during summer. Works literally, unsure about economic based on borrowing from future though. Seems like desperate measure to conceal certain illness I would think.