How Changing Interest Rates Affects Property Buyers NZ

Interest rates are always subject to change, increasing or decreasing as we move through different economic cycles. This can be daunting for many homeowners paying off mortgages as well as potential buyers looking to enter the market.

Here at Mortgage Masters, we’re the independent mortgage broker Auckland city property buyers can count on for expert advice on the New Zealand housing market. We have a deep understanding of how interest rates affect different homeowners and buyers and can help find a home loan Auckland buyers can use to minimise their interest expenses.
For the best mortgage broker Auckland has on offer, contact the experts today.


How Interest Rates Affects First Home Buyers


The official cash rate is now at a 7 year high of 3% as of September 2022, with more rises likely to come. This means added pressure on first home buyers trying to get into the housing market. There’s also a significant disparity between people’s incomes and what they can afford to borrow, compared to what they need to get a home loan.

It can also affect other home loan requirements NZ property buyers may be subject to. Even with a high deposit provided by parents and other schemes like KiwiSaver, many lenders are turning applicants down. This is if they have not saved enough of the deposit themselves, as there’s uncertainty that they can meet the ongoing costs of the loan without further financial aid.


How Interest Rates Impacts Current Property Owners


A higher official cash rate means lenders charge a higher interest rate on top of the principal amount on home loans. Simply put, a low interest rate is good news for property owners while a hike means property becomes less affordable and the cost of servicing debt rises.

Even an increase of 1% interest rate can have a major impact on home loan costs. You can expect monthly payments to increase by an average of 10 to 15%. For example, a $940 000 mortgage paid over 30 years with a 3% interest rate means paying $3963 in interest each month. If the interest rate increases to 4%, that monthly payment increases to $4488.


What About Investors?


Investors must provide a 40% deposit in most cases to get a mortgage for an investment property. With rising interest rates, this makes purchasing property harder to achieve, even when using equity in existing properties, exposing you to higher debt and ongoing mortgage costs. Rising interest rates are also challenging for investors looking to sell property, as there are fewer buyers who can afford higher property prices at the available mortgage rates.

Not all investors are affected the same. Highly leveraged investors will likely need to sell properties to reduce their exposure to higher debt servicing costs. On the other hand, investors who are well capitalised may benefit from an increased demand for rental properties as demand for new homes fall.


Can a Mortgage Broker Help?


By consulting an independent mortgage broker Auckland city first home buyers, current homeowners and property investors may be able to find a way around the hurdles of high interest rates. This includes options like refinancing your home loan or finding lenders with broader lending criteria in the case of first home buyers struggling to find eligibility with major banks.


The Mortgage Broker Auckland City Trusts


Visit Mortgage Masters to consult with the best mortgage broker Auckland homeowners, investors and potential buyers can find for help refinancing. Get in touch today for a free consultation on home loan requirements NZ property buyers are subject to, refinancing and more.

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