With so much happening in the past month, including the return of community transmission of COVID, and the run up to the election bringing some surprising announcements, there’s been a lot you may have missed. We have you covered with two important new stories on the market from the last month.
First Time Buyers Continue To Hold Market Share
The latest Reserve Bank residential mortgage lending by borrower type figures show that nearly $6.6 billion was advanced in mortgages last month – which is the highest figure for a July since the RBNZ started bringing this information together in 2013.
The FHB group borrowed $1.344 billion in July – the highest monthly total by this grouping since the start of this data series, beating the previous record of $1.243 billion borrowed in November 2019. Additionally, the 20.4% share of the month’s mortgage money for the FHBs was that group’s highest proportion – just edging past the 20.3% share the FHBs recorded in June 2020.
Investors have slowly regained confidence as well, with their share growing to 22% from 19.4% in June.
That’s historically low when you compare it with the circa 35% that the investors were taking in the very bull days of mid-2016, but it does show something of a rekindling of interest.
OCR Remains as Is – But could be Dropped Below Zero in 2021
The Reserve Bank’s announced that it intends to keep the official cash rate (OCR) at 0.25% in August, fulfilling its promise that it would not make any cuts over the next few months, but following some not-so-subtle hints in the announcement, bank economists are now predicting that the official cash rate would be dropped below zero early in 2021.
Westpac was the first to formally predict a negative OCR, with ANZ and ASB quickly following suit. ASB economist Mark Smith said the bank had been warning for some time that the current OCR was unlikely to be enough to boost the economy given the hit posed by Covid-19.
Economists at BNZ said on Tuesday that they were currently reviewing the bank’s prediction, hinting that it was likely to follow a similar path in predicting a negative OCR. BNZ head of research Stephen Toplis stated that, “It now looks highly likely that they will go negative.”
The predictions follow statements from the Reserve Bank last week expressing a preference for a negative cash rate, along with a new “funding for lending programme” which would lend money directly to the banks in order to ensure that a lower benchmark rate would be passed on to customers.
Keep in mind that a negative OCR does not mean borrowers will be “paid” for taking a mortgage, as banks need to maintain some margins to cover their overheads as to earn profits. Banks borrow money not only from local depositors but also from Overseas investors.
How much Mortgage Rates can go down is difficult to guess, but it seems certain that Rates will stay low for a reasonable time in the future – and that is good news for first-time buyers and those looking to invest in the market.