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Mortgage strategy in an unsettled market

Market observations

Recent market data indicates more subdued sales activity and less demand in many regions around the country, especially in Auckland where the market has fallen far from its high- point of recent years. Despite this, house prices just keep rising in most areas including Wellington.

The recent LVR restrictions have limited the numbers of buyers in the market, reducing turnover, but has had little bearing on buyers’ willingness to pay.  Mortgage rates have been creeping higher since last October, ending the downward trend that borrowers have been enjoying over the past couple of years. Predictions are that this turnaround in borrowing costs could have a more meaningful impact on house prices than the LVR restrictions.

Mortgage strategy

The right advice and correct structure of mortgages are becoming more important to most borrowers than chasing the best interest rate and cash handout from the bank. Borrowers are now shying away from Floating rates and many are opting to fix their loans, often for just one or two years due to the favourable shorter term rates. This may not be the best strategy for people with large amounts of debt and these clients should seek advice and consider a ‘cocktail’ of different fixed rate terms.

For new borrowers, the support of an experienced broker is more important than ever as lending and credit criteria tighten and cash incentives are being removed by most lenders. As the banks become increasingly likely to turn down loan applications, what I’m seeing now is that clients are happy if they can actually get a loan, rather than feeling they got ‘the best deal’.

It is also an important time for existing home owners and property investors to take stock of their situation and review their mortgage structure with a view to the best management of their debt. I have been successful in helping a lot of people with plans to reduce interest costs and in many cases found ways to accelerate the reduction of principle amount.

If you or someone you know is looking at entering the market or would like to have a chat regarding the current or future property situation status, please contact me today. I will be very happy to meet for a catch-up.