Is Now The Time To Strike With Property?

With the Official Cash Rate (OCR) in New Zealand on the decline, bringing interest rates down with it, the property market is buzzing. Whether you’re a first-time home buyer, looking to refix or restructure your mortgage, or considering a home renovation, this shift could mean significant opportunities for you. Let’s break it down.

A Golden Opportunity for First Home Buyers

If you’ve been dreaming of getting your foot on the property ladder, now might be the perfect time to make your move. Lower interest rates mean lower mortgage repayments, which can make a world of difference when you’re just starting out. With the OCR dipping, this could be your chance to secure a loan that works in your favour, potentially allowing you to afford a bit more house for your money.

Recent data from the Real Estate Institute of NZ shows that the national lower quartile house price—a key measure for entry-level properties—has steadily declined over the past four months, dropping from $600,000 in March to $570,000 in July. That’s a $100,000 decrease from its peak in November 2021. In Auckland, where housing affordability has traditionally been a challenge, the lower quartile price fell by $55,000 during the same period, from $815,000 in March to $760,000 in July. Since its peak in November 2021, Auckland’s lower quartile price has dropped by $206,000.

What Does This Mean for You?

Lower prices aren’t the only thing working in your favour. Mortgage interest rates, which peaked at an average of 7.04% for two-year fixed terms in November last year, have also been falling steadily, reaching 6.5% by July. This combination of lower prices and reduced interest rates offers several benefits for first home buyers:

• Smaller Deposit Required: With lower prices, the amount you need to save for a deposit has decreased. For example, if you’re buying a home at July’s national lower quartile price of $570,000, a 10% deposit would now be $57,000, down from $60,000 in March—a savings of $3,000. Compared to the peak in November 2021, you’d save $10,000 on your deposit.
• Less Borrowing Needed: Lower house prices mean you can borrow less, reducing your overall debt. At July's prices, with a 10% deposit, you’d need a mortgage of $513,000—down from $540,000 in March and $603,000 at the peak in November 2021.
• Reduced Mortgage Payments: Falling interest rates lead to lower monthly mortgage payments. For instance, with a 10% deposit and a 30-year mortgage at the current 6.5% rate, your weekly payments would drop from about $911 to $844—$67 less than what you would have paid in March.
• Easier Budgeting: Reduced mortgage payments can ease financial pressure, allowing for better budgeting and more savings, which can significantly improve your personal wellbeing.

All of these factors combine to make homeownership much more within your reach. With the market shifting in your favour, now could be the ideal time to take that first step. But securing a mortgage isn’t just about getting any loan—it’s about finding the right one. The right loan structure can set you up for long-term success, ensuring that your entry into the market is built on a solid financial foundation. We’re here to guide you through your options, making sure your first home purchase is not just achievable but a smart move towards lasting financial stability.

Refixing or Restructuring Your Mortgage? Now’s the Time

If you’re already on the property ladder, lower interest rates offer a great opportunity to revisit your mortgage. Refixing or restructuring now could save you thousands over the life of your loan. With rates dropping, locking in a new rate could mean more manageable payments, freeing up cash flow for other investments or goals.

What to Consider:

• Market Uncertainty: The market is difficult to try and predict. Currently, the OCR sits at 5.25%, and while it’s expected to continue falling, it’s essential to remember that external factors like global events, inflation, and economic growth could cause fluctuations.
• Expert Opinions: Kiwibank economist Sabrina Delgado expects the OCR to drop further than the Reserve Bank predicts, potentially falling another 2.5% by mid-2027. Meanwhile, ASB’s senior economist, Chris Tennent-Brown, forecasts the OCR at around 3.25% by the end of 2025, with most fixed-term mortgage rates “comfortably under 6%.”
• Tailored Advice: Sitting down with a mortgage adviser can help you negotiate special rates, structure your mortgage to suit your lifestyle, and assess your risk appetite—whether that’s fixing your rate or opting for more flexibility.

12 months ago, interest rates sat around 7.59%. Fast forward a year and buyers are now seeing some relief in their regular payments.

If the time is right for you to refix your mortgage, a lower interest rate could mean a significant reduction in your fortnightly payments. For example, if you refixed for 1 year in August 2023 and plan to refix for another year, you could have an extra $194 in your pocket every fortnight. This increase in cash flow can offer greater financial flexibility, allowing you to allocate those funds towards savings, home improvements, or everyday expenses. While each situation is unique, having more cash on hand can help improve your financial wellbeing and support your broader financial goals.

Remember, a mortgage isn’t a ‘set and forget’ deal—it should evolve as your life does. A quick review could give you peace of mind and some extra dollars in your pocket.

Renovate or Upgrade: Is Now the Right Time?

Thinking about adding a new room, upgrading your kitchen, or giving your home a much-needed facelift? Lower interest rates could make financing your renovation more affordable. Cheaper borrowing costs might be the perfect opportunity to invest in your property, enhancing its value and making it work better for you and your family.

• Stretch Your Budget: With lower borrowing costs, you might be able to stretch your renovation budget further, allowing for higher-quality materials or more extensive upgrades without breaking the bank.
• Boost Property Value: Renovating now could position your home as a more attractive asset in the future, particularly with the potential for rising property values on the horizon.
• Long-Term Investment: A well-planned renovation can increase your living space and comfort, while also boosting your property’s market value—an investment that could pay off handsomely when it’s time to sell.

After years of record growth, house prices dipped in 2023, and the average time to sell a home shortened. However, homeowners may need to adjust their price expectations to reflect current market conditions.

So, Should You Strike Now?

In short, yes—if it aligns with your goals. The lowering OCR and subsequent dip in interest rates create a favourable environment for making significant financial moves. Whether you’re buying your first home, reassessing your mortgage, or upgrading your current property, now could be the time to take advantage of the current market conditions.

However, it’s important to ensure any decision fits your personal situation. At Lifetime, we’re here to help you figure out if now really is the time to strike, making sure you have all the information and advice you need to move forward with confidence.

Ready to Make Your Move? Let’s Talk.

With the property market shifting in your favour, now’s the time to take action. Whether you're stepping onto the property ladder, refinancing your mortgage, or planning a renovation, we’re here to ensure you make the smartest choices for your future. Get in touch with us today, and let’s create a plan that sets you up for long-term success.

Click here to book an obligation-free chat with one of our financial advisers.

Article by Sarah Maclennan

Disclaimer: This article has been prepared for the purpose of providing general information, without taking into consideration any particular person's objectives, financial situation or needs. Any opinions contained in it are held by the author as at the report date and are subject to change without notice.