Lending predictions for 2021

Interest rates will remain at historic lows for the next two years and banks will become more receptive to new customers this year, predicts economist Tony Alexander.

Friday, January 15th 2021, 9:24AM

In his latest newsletter, the former BNZ chief economist predicts the record lows in the market will stay in place through 2022, incentivising Kiwis to spend rather than save. 

Nonetheless, Alexander notes "risks are shifting", and says the golden era for borrowers will eventually come to an end. 

He notes borrowers' enjoyment of "good mortgage rate surprises since 1979 has come to an end".

"That is extremely unlikely to be the case here on out and that has implications for the sustainability of rapid house price rises beyond this year into 2022."

"This development will eventually cause some household cash flow pressures – but not in the short-term."

In the year ahead, the economist believes banks will be more receptive to new business and home loan customers, as the economic outlook becomes clearer and NZ edges towards a recovery. 

He predicts NZ lenders will begin to accept the type of deals that were rejected by decision-makers over the past 12 months.

He says: "As bankers grow less concerned about the economic outlook, they are likely to reopen their lending books for the business sector and also increase willingness to fund home purchases for the self-employed and people working in the sectors most heavily affected by the pandemic."

Tags: interest rates Lending Tony Alexander

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