Over the past couple of years, change and uncertainty has come to shape many aspects of our lives and the housing market has been readily impacted by this. With so much to consider, we asked Lawrence Sydenham, BNZ’s Head of Customer Experience for home lending, to answer some of the most common housing and home lending questions our home loan experts have been receiving lately.
What can I do to prepare to buy my own home or investment property?
The first thing you can do to prepare is to take control of your expenses and consider whether your spending needs to change to ensure you can manage your home loan repayments. When you’re doing your calculations, add a good-sized buffer on top of your repayments to be confident you can manage if your financial situation, or interest rates, change. Use our mortgage repayment calculator to work out what your repayments might be.
Once you’ve calculated what your repayments might be, you could start thinking about the different ways you can get your deposit together. If you’re buying your first home, consider whether you’ll need to use your KiwiSaver savings for your deposit – if you do, make sure you leave plenty of time to withdraw the funds. If your KiwiSaver fund is with BNZ, you can learn more here about how KiwiSaver could help you get into your first home.
If you’ll be looking to family to contribute to your deposit, or you have family members you’re helping into property, you should make sure that all parties are ready to work with your bank and provide all the relevant information they need for your home loan application. Collating the documents often takes longer than some people expect and can delay your application.
Lastly, you should take some time to consider which bank you’d prefer to have your home loan with. If you’re using a mortgage broker, this will assist them in knowing who to approach for your home loan. Keep in mind that there are benefits to having all your banking in one place, such as being able to quickly review account balances and lending, so that you have more clarity and control of your financial goals.
Is now a good time to buy or should I wait?
With the number of listings in some areas more than twice what they were last year, there are likely to be more homes to choose from. Paired with the increase in the cost of living, this means that some areas are seeing declines in prices, especially when compared to the peak last year. There’s more choice for those looking to get on the property ladder, or to upsize or downsize. However, there isn’t too much pressure on homeowners to sell just yet, given the relatively stable employment picture.
If you’re looking to sell, it’s worth seeking advice on whether selling your current home and finding your new home is the best approach for your needs. With some of the heat having left the market, there’s more opportunity to slow down and consider putting in offers subject to sale of your own property. Doing so can help provide some certainty in the process and the timeline.
There are a lot of reasons to buy now, and plenty of reasons why you might want to wait. The main thing to consider is your personal situation and stability for you and your family. Owning a home in a good area means you can settle and put down roots. If you’re starting a family, you might be considering schooling options for your children. If you have family you’re looking to live near and the right home comes up, then it might be a good time to buy. You might also be unsure of your future financial situation or feel having a bigger deposit would be good, so waiting a little longer might be the right option for you.
Should I fix my home loan for a longer term or shorter term?
Until we’re clearer on how the future economic picture and domestic inflation will impact the New Zealand economy and how this in turn will impact the Reserve Bank official cash rate (OCR) settings, there will be some uncertainty in the short and medium term when it comes to home loan interest rates and property prices.
Choosing a home loan term that is right for you and your circumstances is the key to knowing what your repayments are and being able to manage your finances. If you like certainty and want to be able to plan with a long-term view, then you might want to consider choosing a longer term fixed rate.
We can see that a number of customers are opting for shorter terms right now, perhaps thinking that the economic picture will be more positive in the short term. However, with so much uncertainty and the forecast for OCR increases, it’s possible that rates will still have a way to keep going up before they peak. To spread the risk, you might consider splitting your home loan and fixing at different terms.
What is the housing outlook for 2023?
The Reserve Bank is committed to getting inflation within its target range of 1% – 3%. To balance the performance and underlying growth of the economy, there will be some trade-offs needed to ensure inflation is reduced. This means we still may see some increases in the OCR – this could put upward pressure on home loan rates and downward pressure on home loan affordability.
Some economists are forecasting an OCR peak of mid-2023, but whether this means average median property prices stabilise or go down further from now will in part be driven by buyer sentiment and appetite.
For first home buyers looking to get on the ladder and for investors seeking to increase their portfolios, it could be that any dip and period of flat property prices has a shorter timeline than some might predict – especially if unemployment remains low and net migration starts to see a positive increase.
Whatever your plans, BNZ is here to help you find a way to achieve your property ownership goals.
Call 0800 275 269 to chat about your home loan goals or visit our website to find out more.
This article is solely for information purposes. It’s not financial or other professional advice. For help, please contact BNZ or your professional adviser.
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