Don’t Panic. It’s only March.

Don't Panic. It’s only March.

The markets might be down and it might be a little bit scary, but we’re here to remind you that downturns in markets are just part and parcel of being an investor. This month’s blog is going to explain what a downturn is, what causes them, and what you should do when one occurs. Most importantly we’re going to try to reassure you that it’s nothing to panic about, after all, it’s only March and there’s still a little bit of summer to be enjoyed.

What is a downturn and what causes them?

To summarise it, a downturn is a decline in the economy which generally adversely impacts investments. For a lot of young investors, this downturn will be causing nerves, because it will be the first one they’ve experienced in their time in the market. A few nerves are natural, but understanding what causes a dip, and accepting that they’re a natural part of investing, can help to alleviate the butterflies.

So why does a market dip? The truth is there is very rarely one single reason or clear cut explanation as to why a market turns. More often than not it’s due to a combination of reasons; things like war and other environmental factors, increases in inflation, changes to OCRs, reductions of artificial stimulus and other factors can all contribute.

What all of the above have in common is that they are either based on or generate uncertainty. Uncertainty in turn effectively reduces confidence in the market and the market enters a period of downturn. In the case of the most recent downturn, we think the biggest contributing factors are a high inflation rate that has led to higher than expected interest rates, reduced stimulus from central banks, the political uncertainty stemming from the war in Ukraine, and the ongoing effects of the Omicron outbreak.

So, although it may seem scary when you see your investments are down rest assured that the dip is caused by very real and tangible factors that can be understood and therefore managed.

So what should you do during a downturn?

When trying to figure out what to do in the present a good place to start looking for answers is in the past. Historically investors are fast to react when uncertainty creeps in, but confidence has always returned, and usually quickly, once the initial scare has passed. The reality is markets tend to recover quickly from these types of downturns.

Take COVID-19 as an example; when it first appeared the market spooked, but confidence returned as people realised that life was going to go on. A lot of the people who did panic reacted impulsively and ignored their long term strategies. They did things like shifting their Kiwisavers from growth funds to conservative funds, therefore locking in their losses and missing any potential for a bounce-back off a recovering market (which actually occurred in the same year!)

So, the first and most important thing to do during a downturn is to ask yourself what your investment strategy is. Make yourself pause and consider how long you’re willing to invest for, what you are investing in and the resources you have assigned to those investments. If you’re playing a long term game, and we generally suggest you do, then you need to accept that dips in your investments are always going to be part and parcel of a long term strategy. If you don’t panic and change your strategy the long term growth will usually always exceed the short term losses when viewed over a long enough period.

Just take a look at the bigger picture (literally!)

With new CCCFA rules having landed this is a question we get all the time. If you’re not familiar with what the CCCFA rules are it’s worth reading our previous blog to familiarise yourself as these rules have dramatically changed the bank’s attitudes to lending money.

The banks are now almost forensic in their examination of the accounts and spending habits of people looking to borrow money. The reality is that if you want to borrow money you’ll need to ensure that your bank statements are clean for a minimum of three months. This means reducing any spending that may be seen as frivolous by the bank. Things like takeaways, nights out, retail spending etc will need to be managed tightly before your application to give you the best chance of success.

This level of financial interrogation has seen the number of accepted mortgage applications fall by 25% which has led some experts, including us, to argue that these rules have gone too far and are too invasive and prohibitive to be realistic in the long run. To put it quite simply we don’t think that you should be punished by a bank because you’ve decided to have a three-piece quarter pack after a really tough day at work, especially in an economy that will require consumer spending to keep moving.

1 month view

5 year view

And remember, there are always opportunities

One of the most legendary investors of our times once said in his Chairman’s letter to be “fearful when others are greedy, and greedy when others are fearful.” The meaning behind Warren Buffett’s infamous line has been argued many different ways, but one take is that a period of downturn or instability often presents opportunity. This opportunity arises because otherwise solid investments experience a dip in price due to the downturn in the market giving the savvy investor the chance to build them into their portfolios at a discount.

Take the recent downturn as an example; twelve months ago investors were being “greedy” as they invested in a market on its way up. Now the market has dipped these once “greedy” investors have become “fearful”, and as such the cost of some investments have dipped meaning the canny investor can purchase great investments at a discounted cost.

The danger with this strategy is when people buy with the intention of making a quick buck, we are not advocating this approach at all. Instead, we are arguing that the opportunity exists to buy solid investments with sound track-records that are going to survive the downturn and add long term value to your portfolio.

This strategy makes the most sense when applied alongside Mr Buffet’s most famous quote; “someone’s sitting in the shade today because someone planted a tree a long time ago.” This quote reflects on the value Warren Buffet sees in a long term strategy. So the smartest investors will be those who apply a long term strstegy, rather than looking at share investing as a way to make money quick. At the time of writing, this investor has stuck to his long term strategy while also purchasing additional stocks, at a discount, in some of the largest companies and funds in the world.

Still have a few butterflies?

If you’re still concerned, worried or confused about the recent dip in the market, or if you’re finding yourself tempted to change your investment strategy please just give us a call on 0800 888 482. We’re here to help you get ahead financially, and sometimes all it can take is a chat to lend confidence, a few tweaks to your portfolio or a little more information so you can make the most informed decisions.

Inflation, the new CCCFA rules and how best to apply for a loan

Welcome to 2022!

We’re back in the office and ready to roll into the New Year. We hope you’ve had a chance to refresh and energise because there’s a big year coming up and plenty of opportunities to get ahead financially.

We thought we’d kick the year off by looking at the challenges and opportunities that lie ahead in 2022. We’ll touch on inflation and what it means for Kiwis. We’ll look at how best to apply for a loan with the banks now in full forensic mode thanks to the new CCCFA rules. Finally, we’ll talk about the chances of property prices levelling off and our thoughts on preparing for if they do.

It may all sound a bit scary but it’s worth remembering that with change comes opportunity, and we believe that with some smart planning you can not only protect yourself and even get ahead this year.

Inflation is on the up and up and up and up…

Unless you’ve been holidaying on a private island with no internet, radio or TV then you’ve probably heard all the talk about inflation.

It’s an important subject because inflation is the reduction of purchasing power of a currency. That is to say, the New Zealand dollar now buys fewer products or services than it did at the same time last year. In fact, it’s the biggest increase in consumer inflation that New Zealand has seen since 1987. The knock-on effect is that everything becomes more expensive as inflation rises, and we mean everything; from a bottle of milk to the interest payments you’re paying on your mortgage.

The question then becomes why has it happened?

The answer is long and quite complex, but to summarise briefly the below factors conspired to drive higher levels of inflation in our economy:

  • The government pumped money into the economy in the form of grants due to the prediction of a recession.

  • The economy actually continued to power on and no major recession occurred.

  • Asset prices rose.

  • There was strong demand but the reduced supply of products and services.

  • There were labour shortages.

We’re predicting that inflation is likely to continue to rise throughout the year, but there is an upside for those people who have been cautious while times have been good. When inflation rises the unfortunate reality is that some people who have overextended themselves may have to reduce their debt, this provides opportunities for people who aren’t in this position to acquire consumer goods, investments and even property at discounted rates.

CSI: NZ Banks. How to get a loan in 2022?

With new CCCFA rules having landed this is a question we get all the time. If you’re not familiar with what the CCCFA rules are it’s worth reading our previous blog to familiarise yourself as these rules have dramatically changed the bank’s attitudes to lending money.

The banks are now almost forensic in their examination of the accounts and spending habits of people looking to borrow money. The reality is that if you want to borrow money you’ll need to ensure that your bank statements are clean for a minimum of three months. This means reducing any spending that may be seen as frivolous by the bank. Things like takeaways, nights out, retail spending etc will need to be managed tightly before your application to give you the best chance of success.

This level of financial interrogation has seen the number of accepted mortgage applications fall by 25% which has led some experts, including us, to argue that these rules have gone too far and are too invasive and prohibitive to be realistic in the long run. To put it quite simply we don’t think that you should be punished by a bank because you’ve decided to have a three-piece quarter pack after a really tough day at work, especially in an economy that will require consumer spending to keep moving.

Banks are now using your previous spending habits to establish a pattern.

But the harsh reality is that banks are now using your previous spending habits to establish a pattern. They are trying to answer the question as to if you can pay your mortgage and bills if interest rates go up. They are taking any expenditure in the last three months from your statements and basically saying that you will always continue to spend like this even if interest rates do rise and therefore you may not be eligible for a loan. 

The reason we think this is so silly is that most people are capable of budgeting out their wages or salary to pay their bills. Most people will naturally reduce their spending on nice to haves if they need to spend that money on more important things like bills or a mortgage. People are grownups and as such can budget and prioritise, the CCCFA rules, however, are making banks treat grownups like children and that is where they go too far. 

There is good news though; if you are looking to apply for a mortgage for a first home there is the chance that you’ll face less competition if you can successfully get the loan. There are also some really basic things you can do to ensure you have the best chance of succeeding in your application. Give us a call as we deal with this challenge every day, and we can give you some tips and help you navigate this more complex process.

Will the property market finally cool in 2022?

This is another question that we have been bombarded with recently. The media has begun to speculate that 2022 might finally be the year house prices cool off in New Zealand and lots of people are asking whether this is true. 

We’d begin by saying that we’re always hesitant to make a definitive call on this question as we’ve seen dozens of commentators with egg on their faces. These commentators boldly claim house price rises are unsustainable and that a “sharp correction” is imminent only to find that in the months following house prices continue to boom. What we would say however is that this year it’s looking far more likely than at any other time in the last decade. This is due to several factors:

  • The new CCCFA rules reducing the number of new homebuyers in the market.
  • Inflation driving up interest rates causing some people to hold off buying while others struggle to service their levels of debt.
  • The long tail of Covid that’s at best unpredictable given the contagious nature of the Omnicron. 

So back to the question; will house prices level off in 2022? The short answer is maybe. The long answer is that if they do and you’re a first home buyer, an investor, or just looking to upsize then now is the best time to get your finances in order. This will ensure that you are ready to pounce and take advantage of any great deals or opportunities as they present themselves.

Here’s to a big year

As we said upfront there are lots of changes, challenges, but most importantly opportunities on the horizon in 2022. We know how scary a year like this may seem but we’d encourage anyone reading this to consider how exciting it could be too. 

If you have any worries about your finances after reading this we’d love you to drop us an email or give us a call so we can chat about how can help. On the flip side if you’re interested in getting ahead this year we’d equally love to hear from you. 

We’re looking forward to getting stuck into the new year and we hope to hear from you soon. 

Cheers,

The Money Men

The year ahead – Property Outlook for 2022

The year ahead - Property Outlook for 2022

We wanted to start this month’s blog by saying happy holidays to everyone, well done on getting through a challenging year and we wish you all a safe New Year. If you’re anything like the team here, you’re looking forward to a hot summer with plenty of cold drinks and minimal talk of Covid. For us, this time of year is always about reflecting internally as an organisation, celebrating our successes while identifying key areas we want to improve in the year to come. We’d encourage everyone reading this blog to spend at least a little time over the break thinking about your financial goals for 2022. To help, we are dedicating this month’s blog to look ahead at what we think the year to come has in store.

A cooling property market in 2022?

Property prices have exploded over the last few years, and no matter where you sit on the ladder you’ve probably come to the same conclusion we have; in the long run it’s unsustainable.

That’s why we can say we’re honestly glad to predict that in 2022 the market will cool slightly. We don’t think it’s going to be a full-blown buyers market, and it certainly won’t be a crash. Instead what we’re predicting is a slight cooling off and maybe a small decrease in prices toward the back end of the year. What this means for buyers is that there will likely be some fantastic opportunities. We’d encourage you to ensure your ducks are in a row so you are prepared to buy. If you need help planning don’t hesitate to contact us today.

So the question, particularly for owners, becomes why is the market going to flatten? We’ve provided a list of reasons below but to summarise demand is going to drop and supply will increase which will level off the playing field. We’ll also have a period in which sellers will expect to realise the high prices they have seen in the past but buyers won’t be willing or able to pay these prices meaning more properties passed in which in turn will trigger a change in market expectations. 

Looking back at 2021 and ahead to 2022

In 2021 we felt we had a great year. One of our goals as a business is to take the fear out of finance for everyday New Zealanders. We were incredibly proud to be asked to give advice on The Rock at the beginning of the year and now on George FM as well. We thrive when offering expert advice and insights in a commonsense way that is easy to understand and being asked to do it on radio was testimony to the fact that people saw value in our approach. For those of you who have been following us on the radio, we hope you’ve enjoyed the banter, but most of all we hope that you were able to use the information we share to improve your financial position.

In 2022 we have big plans for the business. Our main goals are to grow our team and to continue to develop new ways in which we can add value for our clients. As always, we’ll continue to deliver expert advice in a way that is easy to understand and helps everyday Kiwi’s  get ahead.

Get free money from the Government to grow your business

If you’ve been running a business in Auckland in 2021 then you’ll be well aware of the challenges that Covid posed, but hopefully, you’ve also heard of the MBIE Activate Auckland business grants that can go a little way to alleviating some of the pain. There are a few different grants available, but the two standouts are:

Business advice grant –  This grant is for up to $3,000 and it allows you to get expert advice and support to ensure your business keeps moving forward regardless of what Covid throws your way. It can help with areas like financial planning and cash flow management, developing your marketing strategy, creating a digital media plan, or help with your overall business management, continuity, and strategy. All of these areas are particularly important and will help to ensure that your business has the right plans in place to continue thriving regardless of the Covid situation in 2022.

Implementation grant – This grant is for up to $4,000 to implement advice or plans. For a lot of businesses, the reality is that they have a roadmap or plan for the future but might not have the cash reserves to make it happen. This grant can put you in touch with the experts and services you might need to turn these plans into action.

If either of these grants feel like they would be helpful we’d really encourage you to register here, or get in touch if you need a hand.

See you next year

So that’s it from us for 2021. Again we wish you a happy holiday and a safe new year. 

Rest assured that if anything urgent pops up you can simply call us on 0800 888 482 or email us at support@moneymen.co.nz

Otherwise, we’ll be back in the office on the 17th of January ready to kick into a massive 2022. 

 

House prices, mortgage rates and mortgage lending

House prices, mortgage rates and mortgage lending

In this blog, we look at the changing face of mortgages in New Zealand. We look at why it feels like it’s getting harder to get a mortgage, how people with mortgages can find certainty in the face of a changing OCR and increasing interest rates, and a strategy for staying on top of your mortgage. 

Why is it feeling harder to get a Mortgage?

Turn on the 6 pm news and you’re likely to see another report on how quickly house prices are increasing. Property prices in New Zealand have almost become a running joke, but the ones laughing tend to be the ones who are already on the ladder. 

Over the last 12 months, we’ve seen the average price of a house in Aotearoa increase by 27%. That means if you bought a house for $1,000,000 twelve months ago you may well be staring down the barrel of $270,000 in capital gains. 

This is wonderful news for people with property, but it’s devastating for people without and particularly for first home buyers. The price of a home is increasing at a rate that is far outstripping people’s ability to increase their earnings which makes it seem like fulfilling that first home dream is almost impossible.

A lot of our clients are experiencing the challenges increasing property prices are creating for people looking to buy their first homes. It’s disheartening to hear stories of people who thought they had saved enough only to find the drastic increase in house prices means they are now unable to afford what they thought they could just a few months earlier. We so often have clients coming back and asking us to increase their pre-approvals so they can afford to buy something.

There are changes on the horizon in the form of the Credit Contracts & Consumer Finance Act (CCCFA) which is due to arrive on the 1st of December. It’s going to lead to the biggest overhaul of banking policy we have seen in over 8 years. We’ve included a summary of key points below but to summarise this Act is going to increase the level of scrutiny from banks in regards to mortgages. This is being done in the hopes of reducing the risk of people defaulting on their mortgages due to the increased amount of debt most people are taking on to secure a home.

Here is a quick summary of the key points:

  • Banks will need to be able to prove they have undertaken the necessary steps to prove consumers can afford the lending, so you can expect them to take a deep dive into your day to day expenses. Be particularly mindful of using buy now pay later services like Afterpay as these will decrease the amount you can borrow from a bank.
  • Sources of income such as flatmates, boarders and rental income are being scaled back sometimes to as little as 65%.
  • Cutting back on interest-only lending even on investment properties or restricting it to the 60% loan to value ratio.
  • Older borrowers are finding it more difficult to borrow due to having to explain their exit strategy in greater detail.
  • Bank funding for borrowers with less than 20% deposit has been cut by half. Banks are now only able to lend out 10% of their overall lending to clients who don’t meet the 20% deposit requirement. For first home buyers this makes getting a loan even harder, and often only the bank they currently bank with is willing to offer this lending.
  • Due to the halving of these funds the banks have increased the income benchmark for clients to qualify for the lending so now only higher-income households will qualify.
  • There are talks of increasing debt to income ratios with one bank already implementing this and the others unofficially beginning the process behind the scenes. Debt to income ratios specify that you can only borrow six times your household income, so if you have a household income of $100k you can only borrow $600k.

Is it possible to find certainty as interest rates rise and the OCR changes?

For some borrowers, the recent rise in interest rates may have come as a surprise because most people expect an increase in interest rates to be triggered by a change to the Official Cash Rate (OCR). But the fact remains that every fortnight since mid-July we have had emails from all the main trading banks saying that they are increasing their rates.

To be fair we have had our first two increases in seven years to the OCR. The first was due to the pandemic on October the 6th when it went up by 0.25%, and the second 0.25% increase was on November the 24th. Economists are predicting that the OCR will hit 1% in the next 6 months and reach a high of 3% by late 2022. All of this means that we can expect to see further increases to interest rates, likely 4%-5% for 1-year rates. The reality is that it’s unlikely for them to go higher than 5% as if they were to hit 6% then mortgage payments would account for 51% of gross household income, the worst level in 18 years and something that would be unaffordable for the country.

With the above in mind, we’ve taken a look into the crystal ball and our mortgage rate predictions at Money Men HQ are:

2021 – 2.55%
2022 – 3.75%
2023 – 4.5%
2024 – 4.4%
2025 – 4%

4% may seem high to those borrowers who got their first mortgage when rates were at an all-time low but in reality, it’s still very low and represents good value for the borrower. If you don’t believe us just ask your parents about the interest rates they had when they bought their first homes.

If all of this talk of increasing OCRs and mortgage rates is keeping you up at night then we’d suggest you think about fixing your interest rate for a longer period. We expect that in the medium-term rates are only going to go up, and as such we believe that by fixing now you will lock in a lower rate and therefore reduce your overall mortgage payments.

The Money Men Mountain Trek – Saturday the 20th of November

Mental health has become an incredibly important and topical point in New Zealand recently, and it’s something that we couldn’t be prouder to support. We know from our work, and the research out there, that there is a direct link between financial health & mental health, and we know that right now with everything that is going on in the world how important it is to keep talking about the subject. 

We are long-time supporters of The Movember Foundation and believe in the work they do to increase awareness around men’s health – and in particular men’s mental health. This year the whole team got involved, and we couldn’t be prouder of the money we raised for this great cause.

Our team and a bunch of other great New Zealanders walked up Mt Eden 46 times in one day. This summit walk is 196m, so by doing it 46 times we equalled the elevation of Mt Everest at 8,848m. We did it to raise money for a great cause, to encourage people to reach out to their friends and whanau, to start conversations about checking in on loved ones, and to encourage people to get out into this beautiful country and enjoy the fresh air and great outdoors.

We started early and finished late in our effort to “move for Movember”. Thank you to everyone who showed up and supported us and this cause. Whether you did 1 lap, 5 laps, 10 or the full amount, or even just showed up for a chat, it was truly appreciated. 

April-May Industry Updates

April-May Industry Updates

Welcome to our April Newsletter

 

Each month, we’ll be digesting market news and sending you our best summary – so you can keep your finger on the pulse and only read what’s relative and important.

There is already lots of information out there, so we don’t want to regurgitate it all for you – but we will aim to translate it in plain English and actually tell you what it means and how it might affect you, so you can make better, more informed decisions.

And of course, we are always here if you want to chat about anything in more detail.

What a month to start on, we have a lot to unpack and to say there have been some changes in the property market lately is an understatement. 

It’s very difficult to argue that house prices are increasing at a sustainable rate and that the massive increase in values across the country will continue forever.

No one is denying that.

We cant help but feel that investors have become the punching bag for the bigger problems associated with housing affordability which is that we simply can’t build enough houses and haven’t
for decades.

The cost of construction and red tape seem to be the biggest hand break.

Our issue with these changes is that the property investors that we see on a daily basis are really hard working Kiwi’s trying to get ahead by investing in property and that these changes announced on the 23rd March could have a significant impact on them.

80% of investors only own one property but it seems like the picture the Government is painting is that an investor is someone driving around in a Bentley.

Let's have a look at the recent changes in the Property Market...

The Government is giving $3.8 billion towards housing supply and infrastructure which is
great, we just hope it gets actioned.

Brightline test increased from 5 years to 10 for investment property.

New builds remain at 5 years.

First Home Grants have had the price and income limits increased to try and make it easier for First Home Buyers to qualify for the grant.

First Home Grant Income cap lifted from $85k to $95k for an individual and from $130k to $150k for a couple

Auckland cap on the value of a property has gone up for new builds from $650k to $700k and for existing property from $600k to $625k

The removal of interest deductibility for investors which means they can no longer offset their interest expense against their rental income

This applies from 1 st October and will be retrospectively applied to existing investment properties over the next 4 years

All the points above have a relatively minor impact.
But the removal of the interest deductibility, that came out of left field and its those mum and dad investors hard in the pocket.
Here is an example:

Lets assume you have an interest only mortgage of $500k at 2.29%

$40k rental income received less

$5k for insurance and rates less

$11,450 in mortgage interest cost for $500k mortgage

$23,550 is your taxable income from the property

$7,771 is the tax you would pay prior to changes for this taxable icnome (assume 33% rate)

$3,779 is the new tax you would pay on the mortgage interest

$11,550 is the total tax if you purchased after 27th March

Let us know if you would like a copy of our New Interest Tax Calculator.

Unfortunately, when any cost in a business increases business usually pass on some of that cost to the end user.

The end user in the property investor market is people renting. Tony Alexander, who is arguably the best independent economist in the country, surveyed 1,700 landlords to see if they will increase their rents due to the next tax rule. 73% said they intend to increase rents to allow for the new changes.

Unfortunately the Governments plan to help First Home Buyers is going to be costing those that are saving to enter the market more money making it harder to get the deposit together.

One important point I haven’t seen a lot of media attention focused on is how the banks are going to allow for this increased costs to investors when they are calculating how much lending someone can borrow.

It seems obvious to me that given the significant increase in cost that the banks will come out shortly with new credit policy to take this additional cost into account which means it will reduce the amount of money investors can borrow and could be enough to move some more highly leverage investors into negative servicing.

It all sounds pretty negative for the investors out there getting hammered by Government policy but if we take a deep breath property prices have increased by 35.8% over the last two years as a national average as of Feb 2021 and with interest rates at record lows there is still a very good argument for investing in property and continuing to invest in property.

It will remain a solid investment and the main reason for sharing the above info is to give a heads up to our property investor clients out there that these changes are significant to cash flow and you want to make sure you are aware of how it could affect you.

Don’t make any rash decisions around exiting the market. Be proactive with planning for these tax changes and any future possible changes – we are happy to help.

It’s important to realise that the interest deductibility changes have not become law just yet and needs to get past consultation with Treasury and IRD.

Below is a quick summary on some other points of interest:

House prices:

Disruptive changes like this in the housing market always cause people to sit on their hands while they wait for the dust to settle.

We don’t expect to see house prices fall out of the sky but do expect them to slow due to more highly leverage investors leaving the market and therefore less competition. General expectations still seem to be that property will increase by about 10% over the next year instead of at the current rate which is about 25% so don’t expect to see houses get cheaper!

Demand for property is the main driver for why prices will continue to increase

First Home Buyers:

With less investors in the market for those lower entry properties that first home buyers are after there will be a less competition which is great for First Home Buyers.

Saving the deposit will continue to be the biggest hand break, especially now with increases in rents on the horizon.

Increase salary and house price caps for the First Home Grant might help out some people.

New build properties:

There will be a push towards building new for investors which is what the Government wants.

They are exempt from LVR rules so you can buy with 20% deposit instead of 40%.

You are allowed to deduct the interest as an expense (so pay less tax).

Bright line test remains at 5 years instead of 10.

This will push up the price of land as investors move to secure land over existing housing stock.

Construction supplies will be interesting to watch.

Note: banks all treat construction lending very differently, let us know if you are thinking of building and we can point you in the right direction.

Mortgage Interest Rates:

Up until these recent changes there were rumours of introduction of debt-to-income ratios and potential removal of interest only lending which now seems to be unlikely.

These changes also lighten the load on the reserve bank to have to step in a do something
like increase interest rates to help stabilise property prices so it seems unlikely they will do
this any time soon.

Unemployment is at a low level, the economy seems to be rebounding, commodity prices are increasing and a hint that inflation is on the horizon could suggest further big decreases in interest rates are unlikely and could be close to the bottom of the cycle.

Its our view interest rates wont go up for the foreseeable and worst case if they were to increase it wouldn’t be going up much because these interest rates are what is propping up our economy and the world economies at the moment which is why housing is booming in lots of other countries as people spend the cheap money which is exactly what the Governments want them to be doing.

There is an argument that if you wanted stability with rates potentially at the lower end of the cycle you could lock some lending in for 2-3 years just in case but the 1 year fixed rate continues to be the best performing strategy in terms of the lowest interest cost.

Want to learn more about these changes?

Let us know a bit about you and how we can help you – and we’ll be in touch as soon as we can!