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Housing market boom won't last long: Westpac

Westpac economists say the recent boom in the housing market won't last much longer due to upward pressure on mortgage rates and a lack of funds in the banking system.

Wednesday, February 26th 2020, 4:21PM

In their latest weekly analysis, the bank's economists point to a lack of saving by Kiwis reducing the level of available funding for home lending. 

"While the housing market is on a tear for now, we don’t expect this will last long. New Zealanders are keen to borrow, but less focused on saving," the economists said.

The lack of saving has "crimped the amount of funds coming back into the banking system", and has "resulted in upwards pressure on mortgage rates independent of a change in the official cash rate", the bank said. 

A rise in mortgage rates and falling migration figures are likely to keep a lid on the housing market through the year, Westpac economists, including Dominick Stephens, said. 

"We expect a further rise in mortgage rates over 2020. At the same time population growth is continuing to gradually trend downwards. Together, those conditions are likely to see house price inflation slowing again through the back half of this year."

The bank believes "now is a good time to take a fixed mortgage", as wholesale rates begin to creep up, "as the chances of further OCR cuts fade". It says one and two year rates offer the best value in the present market.

"Among the fixed rates on offer, we think the best value is in the one and two-year rates. Longer-term rates are high relative to where we think future short-term rates will go," the economists added. "That said, fixing for longer terms does offer security against future interest rate increases, and therefore may be preferred by those with low risk tolerance."

 

 

 

Tags: Dominick Stephens mortgages OCR OCR forecasts Westpac

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 3.85 3.95 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 ▼2.45 2.65 2.79
Kainga Ora 4.43 2.93 3.07 3.24
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 3.05 3.19 3.25
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.55 2.69 2.75
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.15 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.00 3.13 3.02

Last updated: 21 September 2020 10:48am

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