If you've been watching the news from the US you'd have noticed statements by Janet Yellen, Chair of the Federal Reserve. The US is heading into an inflationary cycle and Fed rates will be rising.
This impacts house prices in New Zealand. The NZ banks fund their lending by borrowing overseas. Currently the cost of that money is very low, with competing major economies offering deposit rates that are zero or close to zero. Therefore New Zealand is an attractive destination for that money looking for a safe haven.
But with US Fed rates rising, money will start heading to the US as the US Dollar is still the safe haven everyone prefers. That means NZ banks will be faced with the higher cost of obtaining funds, and they'll pass that on to the NZ borrower.
It is prudent therefore to avoid debt over the next few years, at least until the impact of Trump policies is fully understood. Home owners could look at fixing their home loan rates, say, for five years if the mortgage is a large one. Reduce credit card debt.
If buying a house right now, maybe look to keep saving, deferring the decision to buy. As rates rise houses will come on the market that are being sold by owners heavily indebted and unable to afford repayments. Yes, house prices could even fall in this scenario. Prices are already plateauing in most of the country and small interest rate rises have already been announced by banks. Expect this trend to continue.
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