We're talking Mortgages! Episode 137 / Sarah Bloxham

Episode #137

Today with Sarah, we’re talking about what’s involved in getting ready to talk to the bank, how to navigate through some of the trickier aspects of gaining an approval, and how different it is talking to the bank yourself vs going through an adviser.

If you're a first home buyer, or looking to build your next home, please reach out to Sarah if you'd like assistance in arranging a mortgage. Alternatively, if you're buying something bigger, getting into property investment for the first time, this is where I (Darcy) can really help (and you can help support the efforts of this podcast too!). To speak with Darcy, 

Just click on this link to book in a 60 min initial consultation.  

Property Market Update: In the property space, last 12 months has been like going for a bus ride with a driver who views the accelerator and brake as buttons and not pedals.

As soon as Covid hit our shores, easing lending regulations and low interest rates ignited a fire. Property investors didn’t start the fire -it was already burning with first home buyers by the time they showed up. Either way, the were all going after the same, limited stock of housing. Both groups are in the bus while the driver, the Reserve Bank, punches the pedal to the metal, but then the brake to the floor.

Property sells newspapers – The public perceives injustice in the housing market, the media spins, then serves it up, Government responds, and the Reserve Bank takes action. 

So while that’s playing out, here’s a few truths [opinions!] quietly lurking in the background.

  • Low interest rates lead to higher property prices – higher property prices make us feel good, then economic wheels begin turning.
  • Interest rates cannot increase – Covid in the community or not, NZ has to adopt a similar monetary policy strategy as other countries are, and that means we get the medicine even though we don’t have the sickness.
  • Central banks need inflation, and will risk the possibility of higher inflation to get it
  • Given the size of the typical mortgage in NZ, a small increase in interest rates could be devastating. Lowering the cost of money will always directly add to the value of property. Increasing the cost of money from here may not bring down property prices, but it could cause massive mortgage defaults.
  • Because interest rates will be low for a long time, more lending rules and work-arounds will abound from here. We’ve seen the loan to valuation ratio’s kick in again to 60% for investment properties, But you’ll also likely see debt-to income ratios, loadings on property investor loans and less interest only loans being offered – all moves designed to offset the asset inflation which is a natural byproduct of cheap money.
  • So if inflation is the goal, the pump’s been primed in the form of quantitative easing but this isn’t enough - there needs to be a catalyst to get that money moving. We need velocity but how do we get it? I think property values are the key – the goal is to create a wealth-effect by allowing property values to increase – this encourages spending, and this spending partially aids in economic recovery.
  • I’m not sure if this is the consensus view, but I think it’s pretty simple: The government doesn’t actually want to stop a rising house market.

Rising property values and rising inequality are not unique problems to NZ. It’s an uncomfortable season of allowing the gap to widen for the greater good – it’s not cool at all, but it’s happening. Inequality is growing here, there, and everywhere, but maybe this is the lessor of two evils? On one hand people who own get more and those with little get less / on the other hand, perhaps in the process of allowing the wealthy to do even better, we avoid an economic depression.

What this all likely means for you, if you own property, is that...