Westpac's economists predict higher mortgage rates will eventually start pushing down house prices

Does anyone know when Grant is due to make his big announcement? My understanding is that it was delayed until mid March. IE, now.

Speaking to a colleague I was surprised to hear them describe the interest only mortgage they took out to buy their first home. To paraphrase "we can't really afford it, but we had to buy now before we lost any chance of owning a home".

That's right, they have taken out an interest only mortgage, with payments they will struggle to afford, in a desperate attempt to own their own home. This is where we are at. Its equally sad and scary.

Nah, they've been wrong before.

I think it's more reasonable to be go for the range between 780 - 850K national median.

If you think NZ is bad, just watch how the Aussies do it.

https://www.realestate.com.au/news/seven-signs-the-australian-property-…

On a scale of 1 to 10, how much do you believe this?

Really

Govt announcement will be as followed.

Increase in accommodation supplement..

Followed by increase in first home buyers grant by another 10k..

We need Yvil's input. He will know. I fell for this story last time, didn't listen to Yvil, and got burnt 10k when fixing for three years.

I'm hearing from some well placed sources that banks are "very nervous" where interest rates are heading and the overcooked market in NZ - theya re also worried that people are dumping "bad houses" onto the market as the peak nears. Those sources are saying the following
1. From April - the banks will lift the lending standards by a full 1% - measuring homebuyers affordability by an additional 1% to ensure when rates do lift - new homebuyers will be able to afford them.
2. 3 of the 4 big banks require anybody with a deposit of less than 40% - both owner occupiers and investors to get independent valuations before approving loans
3. All the big banks want to see building reports on properties before approving loans and will refuse finance if there are any concerns on the report.

I find it amazing that we some are posting flippant comments.
If I had a large mortgage and other debt I wouldn't be flippant but rather would be looking to paying down debt and especially questioning the real need for large discretionary spending.
The reality is that a 1% rise on a $600,000 mortgage is $230 a fortnight - and that is after tax (nearly $300 fortnight of pretax income).
Got a $230 a fortnight spare?

I wish Interest would shed some light on the levels of consumer debt collateralized by the consumers home, ie funding lifestyles and cars using newly gained equity in their house

"Thirdly, the Reserve Bank is going to require banks to hold more capital over coming years.

Freed from the physical constraints of actually holding cash, Basel essentially moved reserve requirements from the asset side of the banking system’s balance sheet to the liability side. Banks were no longer limited to multiplying credit from their reserves of national currency on hand. They could now produce credit and deposits from their store of equity capital. And a large segment of equity capital is retained earnings, meaning banks could multiply their own ability to create credit and leverage through using leverage on their own profitability. The status quo of the banking system has become one in which banks themselves control the levers of money creation – it is the wildest fantasies of the banking system come true.

But in depending so much on leverage, the banking system has become overly dependent on collateral. Collateral provides the lowest cost short-term operational funds while at the same time, depending on the particulars of each class of collateral, affords a reduction in the equity capital charge via regulatory definitions of “safety”. A repo transaction for a bank is a collateralized loan where a bank can fund assets at that lowest cost. In terms of the overall quantity of those assets a bank can ultimately hold and turn into profits, the securities that adhere to regulatory definitions of safety lead to the lowest capital reserve charges, and therefore provide both regulatory and funding leverage.

This accounting trick of regulatory safety meant financial innovation was needed to not only transform risky assets, but to mass-produce them as “safe”. Securitization of mortgage debt was one innovation widely used to create AAA-rated securities that were readily accepted as low haircut repo collateral, while at the same time using up as little equity capital as possible. The interest rate paid by the underlying mortgages and the traditional concept of risk/reward were secondary and tertiary considerations to how much leverage could be obtained and applied. Quality of assets was hardly considered in the pursuit for ultimate quantity. Link

Good. The sooner NZ interest rates rise to a more normal., sane and sustainable level, the better for NZ. Global interest rates are on a gradual but relentless upward trend, and is just question of time before NZ rates follow suit. If house prices decrease significantly as a result, deflating but not crashing the housing Ponzi, even better. Orr can keep the OCR as low as he likes, but markets will go their own way regardless.

This fake information is floated to keep the hope alive for FHB's.
Now Govt. will think for next couple of months whether to take any action or not because in Dec 2021 the interest rate is going to increase (not more than 0.25% please), till then send the prices to moon.

Banks will start sponsoring food banks.

I think the biggest risk of a downside in the housing market is political in nature. Not so much from votes going from Labour to National but from Labour losing votes to the green's. Labours complete lack of action with regards to housing will turn a segment of there support base (young, middle class, liberal) away from Labour & to the green party. I could easily forsee greens polling close to 15-20% by next election with labour polling in the 37.5-43.5% age bracket. This means Labour would require the green's to form a government come 2023.

I guess it then comes down to how hard is James Shaw willing to fight for a capital gains/wealth tax. Will he sell out his party's policies for a few ministerial positions or will he dig in over the issue. I would argue the later as he knows that a good chunk of his support are disillusioned young voters who will never own there own home. Greens only poll at about 5% with just the enviroment & socialist vote.

Banks should be restricted on creating currency. Only allow new credit creation on new builds and exsisting currency on current homes.

It's simple, Govt. will not let the house price fall, because NZ economy is nothing without house boom. Renters who are waiting will be keep waiting only (train have left the station it is not going to come back), last year May i remember everyone was shouting over the rooftop that house prices are going to fall more than 10% and here we are it increased 38%.
So now you think Govt. have guts to control it (in dreams). It is on fire attend 4 Auctions and you will know the reality, believe it or not it will not going to happen, no mater what ever you write in comments no one is reading.

Interest rates have nothing to do with it... 2002 to 2007 100 percent increase with rates above 8 percent. Explain that westpac???

The bank cartel, try to sound OCR then LVR but will still reject DTI.. the sound from Banks, is actually where the RBNZ & govt 'have to listen' - NZ retail banks held every vital organs, the CB & govt just have to follow. Higher mortgage? Higher TD rates? - usually after RBNZ OCR announcement, so this is that scaremongering sign in which.. true in essence. Both CB & Govt don't want to raise the OCR for sure, but they'll will just follow the banks club, OCR will only be up... following of retail Banks upping their rates soon - again OZ win,.. poor Kiwis.

Not sure how much political power/influence by JA/Lab or GR/RBNZ - as clearly their last year & this year comment sentiments were all the same, price must go up.. albeit even 4%.. on top of 20%, it is a clear wish.
Now, how world market reacts? .. what more the govt & RBNZ can do? .. when 'market confidence' slipping away.. despite 'their numerous attempt to distort it'.. First thing in mind is that no response flight controls.

Maybe I'm just an eternal optimist but I'm still hoping they'll announce something effective.
Before the first lockdown I assumed they would introduce half measures as usual and make an absolute UK style balls-up. Here's hoping they actually do something effective now - they've certainly had long enough to think about it!

People have been encouraged to purchase houses or trade up over the past year on the basis that interest rates would not increase and would more likely go down. Increasing rates now would be a handbrake turn for the market.