Saturday, 20 August 2022
Meet the JournalistsPremiumAucklandWellingtonCanterbury/South Island
CrimePoliticsHealthEducationEnvironment and ClimateNZ Herald FocusData journalismKāhu, Māori ContentPropertyWeather
Small BusinessOpinionPersonal FinanceEconomyBusiness TravelCapital Markets
Politics
Premium SportRugbyCricketRacingNetballBoxingLeagueFootballSuper RugbyAthleticsBasketballMotorsportTennisCyclingGolfAmerican SportsHockeyUFC
NZH Local FocusThe Northern AdvocateThe Northland AgeThe AucklanderWaikato HeraldBay of Plenty TimesHawke's Bay TodayRotorua Daily PostWhanganui ChronicleStratford PressManawatu GuardianKapiti NewsHorowhenua ChronicleTe Awamutu Courier
Covid-19
Te Rito
Te Rito
OneRoof PropertyCommercial Property
Open JusticeVideoPodcastsTechnologyWorldOpinion
SpyTVMoviesBooksMusicCultureSideswipeCompetitions
Fashion & BeautyFood & DrinkRoyalsRelationshipsWellbeingPets & AnimalsVivaCanvasEat WellCompetitionsRestaurants & Menus
New Zealand TravelAustralia TravelInternational Travel
Our Green FutureRuralOneRoof Property
Career AdviceCorporate News
Driven MotoringPhotos
SudokuCodecrackerCrosswordsWordsearchDaily quizzes
Classifieds
KaitaiaWhangareiDargavilleAucklandThamesTaurangaHamiltonWhakataneRotoruaTokoroaTe KuitiTaumarunuiTaupoGisborneNew PlymouthNapierHastingsDannevirkeWhanganuiPalmerston NorthLevinParaparaumuMastertonWellingtonMotuekaNelsonBlenheimWestportReeftonKaikouraGreymouthHokitikaChristchurchAshburtonTimaruWanakaOamaruQueenstownDunedinGoreInvercargill
NZ HeraldThe Northern AdvocateThe Northland AgeThe AucklanderWaikato HeraldBay Of Plenty TimesRotorua Daily PostHawke's Bay TodayWhanganui ChronicleThe Stratford PressManawatu GuardianKapiti NewsHorowhenua ChronicleTe Awamutu CourierVivaEat WellOneRoofDriven MotoringThe CountryPhoto SalesNZ Herald InsightsWatchMeGrabOneiHeart RadioRestaurant Hub

Advertisement

Advertise with NZME.
New Zealand

NZ mortgage rates: How we compare with rest of the world

17 Oct, 2014 04:00 PM6 minutes to read
File photo / Janna Dixon

File photo / Janna Dixon

Anne Gibson
By
Anne Gibson

Property Editor

VIEW PROFILE

New Zealanders are paying some of the highest interest rates in the OECD, our house buyers saddled with the punitive prices due to the regime attempting to stop runaway inflation.

Christina Leung, ASB economist, said that on an international scale our rates were towards the top.

"New Zealand's mortgage rates are some of the highest of the developed countries, but in sharp contrast to developing countries such as India and Philippines which have double-digit mortgage rates. Part of this does reflect our relatively high central bank policy rate with the Reserve Bank being the first central bank out of the developed economies to start the tightening cycle," she said.

READ MORE: Loan rate horrifies TV star

Advertisement

Advertise with NZME.

A chart from the Organisation for Economic Co-operation and Development showed New Zealand rates at 4.2 per cent, behind Mexico and Iceland but paying almost twice as much as the Americans' 2.42 per cent.

Raewyn Cox, Federation of Family Budgeting chief executive, was shocked to find our rates were towards the OECD top.

Many people were struggling with mortgages, partly due to high prices but also because of poor planning. They had not factored life changes - like a double-income reducing to single-income - into repayments, she said.

"Overcommitment is a big issue. We don't see a lot of mortgagee sales because people have become a lot more aware in the last few years."

High prices and high interest rates sentenced a rising number of New Zealanders to be lifetime tenants.

"A lot of people have given up hope and are stuck in expensive rental situations, heading towards retirement," she said.

Related articles

New Zealand|Politics

'No point' in new state houses: English

16 Oct 10:48 PM
New Zealand|Politics

Full interview with Bill English on Social Housing Reform

16 Oct 02:00 PM
New Zealand|Politics

Protest group halts house removal

17 Oct 03:15 AM
New Zealand|Politics

Peters condemns move to sell state houses

17 Oct 04:00 PM

Shaun Drylie, ASB product and strategy general manager, said those rates reflected the health of our economy and world interest rates were low because governments had to cut interest rates to stimulate economies.

"Compared to where we have been, it's now not as hard for New Zealanders to pay mortgages. We have very few mortgagee sales and there's less in Auckland as an average rule because prices are moving up so people in a distressed situation are able to sell their properties a lot easier."

Advertisement

Advertise with NZME.

William Cairns and James Lockie of Ellerslie-headquartered General Finance said our rates were particularly high on the global stage but at least they weren't going up soon.

"The consensus among financial market commentators is that there are unlikely to be any more rate increases this year and the next increase may be as late as June 2015." They also pointed out how much easier it was for the British.

"New Zealand is often accused of having high mortgage costs in relation to borrowers' incomes. For example, for a couple on an income of $100,000, borrowing $500,000 for 25 years at a 6.75 per cent floating rate, this will represent 41 per cent of their income. If the borrowers were based in the UK, where on average rates are 2 per cent lower, the debt servicing is a more respectable 34 per cent. It seems a pity that first-home buyers are penalised with higher mortgage rates and lending restrictions just because we have one of the better performing economies."

But Nick Kotze, a registered financial adviser of LoanMarket, said people should consider the flip side of the high interest rates.

"In economies where the interest rates are higher, you will also find that capital appreciation tends to be higher. Therefore the people who are paying the high interest rates are also bearing the fruit of their property appreciating more than in most of the OECD."

NZ v overseas

Long-term interest rates

Advertisement

Advertise with NZME.

Iceland6.59%

Mexico5.65%

New Zealand4.2%

Australia3.41%

United Kingdom2.42%

United States2.42%

Advertisement

Advertise with NZME.

France1.41%

Netherlands1.2%

Japan0.49%

- Source: OECD

10 point mortgage checklist

Applying for a mortgage or negotiating new terms? Here's a handy checklist on how to get the best deal from your bank

1. Shop around
Some people don't realise it is possible to negotiate a home loan. Your bargaining points include how much deposit you have and how much other business you do with the bank.

Advertisement

Advertise with NZME.

2. Fixed or floating
Ask your banker to outline the pros and cons, particularly in terms of charges and interest rates. Or examine a split option and the benefits or downsides of each. For example, with a fixed-rate mortgage you know how much you'll be paying in each instalment, protected from interest rate increases during the fixed-rate term. The downside is it's less flexible for one-off payments.

3. Break fees
Do your homework and think carefully before committing to a fixed mortgage because altering or getting out of it could cost a lot.

4. KiwiSaver
Can be used to help you buy your first house. Explore whether the KiwiSaver subsidy and withdrawals are options for you.

5. Loan to value ratios are limits on bank lending
How does this affect your buying of a house? The restrictions mean that only 10 per cent of the bank's new lending for residential housing (new home loans) can have a 20 per cent deposit or less. If you are looking to buy a home and have a deposit that is less than 20 per cent of the home's value, you may find it harder to get a home loan.

6. Mortgage broker
If you're struggling to get a loan, you might want to consider this skilled, specialist sector.

7. Repayments
Work out your plan and ensure you'll be able to live on the amount left over after paying the mortgage.

Advertisement

Advertise with NZME.

8. Insurance
Factor into your budget the cost of home and contents insurance and you may be required to take out life and income insurance.

9. Go longer term
Set your initial home loan term at a longer term (say 25 years) and then increase your repayments by as much as you can comfortably afford. You can always reduce your repayments if things get tight. Any repayment increase will add significant benefits over the long term.

10. Look back in joy
If you took out a mortgage a few decades ago, you can probably see the benefits today.

Advertisement

Advertise with NZME.

Latest from Business

BusinessUpdated

Shamubeel Eaqub on 'stupid' inflation debate and how he'd fix poverty

19 Aug 06:03 PM
Premium
BusinessUpdated

Steven Joyce: School shake-up needed for the sake of our kids

19 Aug 06:02 PM
Premium
BusinessUpdated

Insider-trading accused distances himself from Eric Watson

19 Aug 05:00 PM
Premium
Business

Mary Holm: I have $50,000 in cash - should I pay down my mortgage or invest?

19 Aug 05:00 PM
Premium
Business

Fran O'Sullivan: Sharma affair is a mess — 'reject' that, Ardern

19 Aug 05:00 PM

Most Popular

Wiggles in NZ: Wiggles star reveals life changing hospital encounter
EntertainmentUpdated

Wiggles in NZ: Wiggles star reveals life changing hospital encounter

19 Aug 06:03 PM
Shamubeel Eaqub on 'stupid' inflation debate and how he'd fix poverty
BusinessUpdated

Shamubeel Eaqub on 'stupid' inflation debate and how he'd fix poverty

19 Aug 06:03 PM
Premium
Steve Braunias: The secret diary of Gaurav Sharma
New Zealand|PoliticsUpdated

Steve Braunias: The secret diary of Gaurav Sharma

19 Aug 06:02 PM

Advertisement

Advertise with NZME.
About NZMEHelp & SupportContact UsSubscribe to NZ HeraldHouse Rules
Manage Your Print SubscriptionNZ Herald E-EditionAdvertise with NZMEBook Your AdPrivacy Policy
Terms of UseCompetition Terms & ConditionsSubscriptions Terms & Conditions
© Copyright 2022 NZME Publishing Limited
TOP