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Why Fixed Mortgage Terms Might Matter More Than You Think Right Now · That Home Loan Hub

• 0:10
  SPEAKER_01: If you are worried about the economy and the state of it, this is the episode for you.
• 0:15
  SPEAKER_01: We're gonna make you more worried.
• 0:16
  SPEAKER_01: No, I'm kidding.
• 0:17
  SPEAKER_01: Absolutely.
• 0:17
  SPEAKER_01: Hello, James.
• 0:18
  SPEAKER_00: Hey, how's it going?
• 0:19
  SPEAKER_01: Good.
• 0:20
  SPEAKER_01: What are we talking about today?
• 0:21
  SPEAKER_00: Well, you know, it's been a I think we're at a bit of a a changing juncture in the New Zealand economy.
• 0:28
  SPEAKER_00: So I think we'll have a look and see what's happened over, have a bit of a chat about what's happened here in the last few weeks, you know, since the Christmas holidays and stuff like that.
• 0:35
  SPEAKER_00: Awesome.
• 0:36
  SPEAKER_01: Um Tell me, what's been happening?
• 0:38
  SPEAKER_00: Well, I think we've got a very interesting situation going on.
• 0:42
  SPEAKER_00: And if those people have been following what's happened in Australia a little bit, every time they lower when they were started lowering interest rates over there, the inflation bumped up over three percent.
• 0:53
  SPEAKER_00: So it's kind of meant they they can't get the economy going as quite in in the way they want to.
• 1:02
  SPEAKER_00: And whilst we had a pretty we've had uh interest rates lower been lowered here, the OCR over the uh towards the end of last year, some quite big drops.
• 1:11
  SPEAKER_00: But we did see the banks all left their fixed interest rates middle of December, didn't we, over a couple of weeks, and that surprised a lot of people.
• 1:20
  SPEAKER_01: Yeah, it came out of nowhere.
• 1:22
  SPEAKER_01: It sort of blindsided a lot of people that were still hoping the interest rates will continue to either go down or stabilize.
• 1:30
  SPEAKER_01: And then all of a sudden it's on the way up.
• 1:33
  SPEAKER_01: Yeah.
• 1:34
  SPEAKER_01: Everyone's panicking, everyone's trying to fix, and everyone's going, what the hell's going on now?
• 1:38
  SPEAKER_01: And what's next?
• 1:39
  SPEAKER_01: So what's next?
• 1:40
  SPEAKER_00: Well, what's next is I think we've got inflation out tomorrow.
• 1:44
  SPEAKER_00: There's an inflation data, some inflation data out tomorrow, but uh the most recent one came out at uh 3%.
• 1:50
  SPEAKER_00: So that is right on the upper limit of what the Reserve Bank wants to put it, wants to see.
• 1:57
  SPEAKER_00: I think they want to see somewhere between one and three percent.
• 2:00
  SPEAKER_00: So if inflation is sitting at three percent, and if if it's showing signs of even increasing a little bit from there, the there's certainly not going to be any more interest rates cuts.
• 2:12
  SPEAKER_00: The next move would likely be up.
• 2:14
  SPEAKER_00: I'm not saying that's gonna happen in the next few months, but you know, you could see that in the middle to late of the year, middle to late period of the year.
• 2:22
  SPEAKER_00: If that inflation does come in over three percent, we're certainly not gonna get any cuts, but the and it would indicate that the next move will be up.
• 2:30
  SPEAKER_00: And so if you're thinking of this from a mortgage point of view, I'm not saying rush out there and and set your fixed mortgage, uh, but you certainly should be considering it.
• 2:39
  SPEAKER_00: If you want to, if you want a good long-term fixed rate, I think you need to be uh if that suits your circumstances, I think you certainly need to be considering that.
• 2:50
  SPEAKER_01: Yeah, and there are still some good rates out there for longer terms.
• 2:53
  SPEAKER_01: We've still got twos and threes that we can find under under five percent.
• 2:57
  SPEAKER_01: So two year and three year under five percent, and even over three years, um, you know, they're still sitting under five and a half.
• 3:05
  SPEAKER_01: So that's quite good considering where we've come from.
• 3:08
  SPEAKER_01: Because over the last 24 months we've been sitting in quite high six and sevens.
• 3:13
  SPEAKER_01: Yeah.
• 3:14
  SPEAKER_01: So definitely positive change that we've seen.
• 3:18
  SPEAKER_01: But if you want to avoid going back to the six and sevens, maybe it's a good time to I do think so.
• 3:25
  SPEAKER_00: And uh like I mean, I just just uh as an idea of how quickly things can change.
• 3:29
  SPEAKER_00: I was talking to an investor middle of December, and we were looking at and he wants a five-year rate.
• 3:35
  SPEAKER_00: So he wanted to lock in a five-year rate at five percent.
• 3:38
  SPEAKER_00: That was our goal.
• 3:40
  SPEAKER_00: And things just took a lot longer uh than than normal to process because he wasn't based in New Zealand, he was based over based overseas.
• 3:48
  SPEAKER_00: So we missed out on the five year at five percent, and now we're looking at you know, it's five, it's just under five and a half.
• 3:54
  SPEAKER_01: Yeah.
• 3:55
  SPEAKER_00: So that's quite a big half a percent is quite a big jump for him to get his head around.
• 4:00
  SPEAKER_00: Um, so it's that's a little bit disappointing, but you you just can't sometimes you just cannot forecast how quickly these things are gonna change.
• 4:08
  SPEAKER_01: No, and the other thing I've been hearing as well is that when the you know, the people, the bankers that are working in markets, so that's your shares, traders, yeah, they've been fixing for long terms.
• 4:22
  SPEAKER_01: So if they're fixing for long terms, obviously they're seeing something on the market that the change is coming.
• 4:28
  SPEAKER_01: Yeah, the rates are coming back.
• 4:29
  SPEAKER_01: So those that are floating, I know a lot of clients last year left their loans on floating because they were hoping that the rates will come down.
• 4:38
  SPEAKER_01: Yeah.
• 4:39
  SPEAKER_01: And I think now is the good time to go and sit down with a financial advisor.
• 4:44
  SPEAKER_01: One of us or anyone, just reach out to someone, but have a chat and have a look at your loans.
• 4:49
  SPEAKER_01: Don't just leave it too long for floating.
• 4:50
  SPEAKER_01: Even the floating ones have gone up recently as well.
• 4:53
  SPEAKER_01: Yeah, a few of the main banks have lifted them slightly.
• 4:56
  SPEAKER_01: And the other thing that lifted as well is the servicing rate.
• 5:00
  SPEAKER_00: Yeah.
• 5:00
  SPEAKER_01: So not many people are talking about it, but one of the main banks has also lifted the servicing rate, meaning they're tightening up how much you can lend.
• 5:09
  SPEAKER_01: So we're seeing slight adjustments against.
• 5:12
  SPEAKER_01: I believe last year was a year of, hey, get on the property market, you know, the rates are coming down, the servicing is easing up.
• 5:20
  SPEAKER_01: Let's go, let's go, let's go.
• 5:21
  SPEAKER_00: Yeah.
• 5:21
  SPEAKER_01: This year, I think it's all going to be about cautious.
• 5:24
  SPEAKER_00: Yeah.
• 5:24
  SPEAKER_00: Cautious optimism, optimism, I think.
• 5:27
  SPEAKER_00: Yes.
• 5:27
  SPEAKER_00: And just from what I can pick up anecdotally, people in the construction industry, I know that they're getting a lot more, a lot more leads in that area.
• 5:37
  SPEAKER_00: I feel like that's improved a wee bit since the sort of middle of the middle to late period of last year, which is quite interesting.
• 5:44
  SPEAKER_00: The economy's definitely picking up.
• 5:46
  SPEAKER_00: And what's the other thing Umder was going to mention?
• 5:52
  SPEAKER_01: The other interesting point as well that we always look at is the rent.
• 5:55
  SPEAKER_00: Yeah.
• 5:56
  SPEAKER_01: Apparently, there was a big article about how the rents should be dropping because the interest rates are easing, and therefore the landlords should really pass on this cuts.
• 6:06
  SPEAKER_01: But as I've been talking to a person in the office, I I've tried to explain the the landlords can't easily increase uh decrease their rents because all the other costs have been going up.
• 6:18
  SPEAKER_01: Yeah.
• 6:19
  SPEAKER_01: So that's your rates and that's your insurances as well.
• 6:22
  SPEAKER_01: Absolutely.
• 6:22
  SPEAKER_01: So if you're a tenant and you're thinking, well, I'm listening to this, the interest rates are going down, my landlord should really give me a discount because my landlord is getting a discount.
• 6:32
  SPEAKER_01: Well, your landlord is only getting a discount in one element of life.
• 6:37
  SPEAKER_01: But in all the other elements, when it comes to having a property, everything else has been going out.
• 6:42
  SPEAKER_00: And those and that discount that he might be getting on the interest rate, they they may not be getting that straight away.
• 6:47
  SPEAKER_00: They might they may be on a fixed, a fixed loan, right?
• 6:50
  SPEAKER_00: For that's locked in for a couple of years.
• 6:52
  SPEAKER_00: So just because the interest rate's coming down, it's not actually gonna really benefit the investors.
• 6:57
  SPEAKER_00: But the rates in insurance, yeah.
• 6:59
  SPEAKER_00: I've like the I talk to a lot of people in the retired sector, and it's absolutely killing them because their pension hasn't gone up.
• 7:08
  SPEAKER_00: But the the insurance that they have to pay and the and the rates if they own a house has gone up phenomenally, and it's just unaffordable.
• 7:18
  SPEAKER_01: And I think the Wellington region is getting another review this year for the council rates.
• 7:22
  SPEAKER_01: Yeah.
• 7:23
  SPEAKER_01: And that usually sets your rates as well for the next 24 months or whatever it is.
• 7:28
  SPEAKER_00: So that'll be very interesting because Wellington is one of the areas that you know you're seeing a little bit of house price growth in some of the other positive increase, yeah.
• 7:37
  SPEAKER_00: In some of the other areas, not Auckland or but Wellington is one of the I think it's down like 30% since the peak, the Wellington region.
• 7:44
  SPEAKER_00: So if you're a a new house first home buyer or an investor in the Wellington region, I think it's a pretty awesome time to be having a having a chat to us because it will pick up again.
• 7:56
  SPEAKER_00: But but it'll be interesting to see what the council does with the rates because there's a bit of a link, isn't there, between rates and property prices in theory.
• 8:03
  SPEAKER_00: There is talked about a wee bit.
• 8:05
  SPEAKER_01: And there's also the water rates.
• 8:06
  SPEAKER_01: Um, there's a big beast of Wellington water that has been at a big debate.
• 8:11
  SPEAKER_01: I think we should do a whole episode on Wellington water and how that's going to affect your property prices as well.
• 8:17
  SPEAKER_01: So um, so this one has been a bit of a funny episode for you in order to understand where we're sitting.
• 8:23
  SPEAKER_01: So just a quick summary the economy looks like I think we're improving.
• 8:28
  SPEAKER_00: We're definitely it's definitely improving.
• 8:29
  SPEAKER_01: It's a but the follow on side effect of that that the interest rates may go back up again.
• 8:34
  SPEAKER_01: So reach out, let's talk, let's find out if you're in the right place.
• 8:37
  SPEAKER_01: Thank you, James.
• 8:38
  SPEAKER_00: No worries.