Price drops and supply increases will be welcome news for prospective buyers, but recent first homebuyers who spent up large now to own an asset that is less valuable, and increasing interest rates due to inflation, could make paying off a hefty mortgage more challenging, as a cost of living crisis also bites.
“However, the bulk of the house price impact from the mortgage rate surge is yet to come. About 60% of all mortgages rates will be reset over the coming 12 months,” ASB said. Interest rates could nearly double for some households, ASB economists said, but it does not expect the change to lead to widespread mortgage distress or forced sales. “But the rate shock will siphon a bunch of extra disposable income out of Kiwis’ wallets this year, hitting discretionary retail spending hard.”that while 20% sounded like a big drop, it would put prices back only on par with where they were at the start of 2021. Median house prices rose 31% in the year to July 2021.
“That illustrates the ferocity of the rise in house prices during what turned out to be a brief period of super-low interest rates,” he said. Gordon added that increasing incomes and a rise in household savings would take the edge off a downturn. “The slowdown we’re forecasting looks more likely to be a soft landing, rather than a crash.”
Good
Shit should race out and cash in my super !