Restrictions' impact not sustained: Report
A return to more normal interest rates might have more of an impact on house prices than the new LVR restrictions, says BNZ.
Friday, October 4th 2013, 12:00AM
by The Landlord
In its latest Economy Watch, its economists say they are unsure whether the restrictions will affect prices in any sustained way.
“The more powerful, and permanent, correction mechanism might well have to come from normalized interest rates. Returning interest rates back to average will certainly increase debt servicing costs, giving households a better sense of the relatively high debt loads they continue to carry, overall.”
Most homeowners have floating or very short-term fixed mortgages. More than 90% still have a duration of less than two years.
“This suggests a lot of pinch when OCR increases come into play – especially with longer-term mortgage rates already a good chunk higher than short-term ones, giving people ‘nowhere to run’.”
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