A quick look at the data

The study, which was carried out by Digital Finance Analytics (DFA), analysed the financial headroom of 26,000 Australian households, and concluded that 1 in 5 (20 percent) Australian households would experience financial difficulty if mortgage rates were to rise just 0.5 percent.

“This is important because we now expect mortgage rates to rise over the next few months, as higher funding costs and competitive dynamics come into pay, and as regulators bear down on lending standards,” (DFA) wrote, as quoted by the NZ Herald.

The DFA’s findings hit close to home, given that similar factors are tipped to shape New Zealand’s property market in the months and years to come.

Fixed interest rates on the rise

In fact, we’ve already seen a number of mortgage providers raising their fixed home loan interest rates this year.

As the NZ Herald reported, SBS bank, the Co-operative Bank and Kiwibank have all increased interest rates on their fixed mortgage products twice this year, while ASB is expected to roll out similar hikes later this week. Over the past year, the average interest rate for a two-year fixed-rate home loan increased 13 basis points from 4.74 to 4.87 percent.

Using a New Zealand mortgage rate calculator will help you find the best deal in the here and now – but rates change. As such, it’s critical that you have a reasonable amount of ongoing financial surplus when purchasing a home so you can roll with the punches when the economy shifts.

The post Will you lose your home if mortgage rates rise? appeared first on PocketWise.

Here are three things to keep in mind when considering taking out a fixed rate home loan:

1. Restrictions on extra repayments

Most fixed rate home loans have restrictions and/or strong disincentives (such as expensive fees) in place to prevent you from making extra repayments on your mortgage. This means that your home loan could take longer to pay off than it would under a floating arrangement, and expose you to unnecessary interest.

2. Market rates could drop

Fluctuations in the Official Cash Rate (OCR) do not affect fixed rate home loans – and this is both a blessing and a curse. If the OCR increases, you don’t have to worry about repayment hikes and sudden financial stress. However, if the OCR decreases, the economic benefits do not trickle down to fixed rate home loan customers, which can be incredibly frustrating.

3. Break fees

Almost all fixed rate mortgage products come with large break fees. If you choose to sell your property or prematurely terminate the home loan agreement for some other reason, you’ll be forced to pay a substantial penalty. Be sure to check the fine print before signing anything!

There are many pros and cons to the various home loan products in New Zealand, and what’s right for one person may not necessarily be the best option for you. Hop over to our home loan comparison tool for more insight into current fixed rate home loan options and take the next step in the home owner journey.

The post What are the cons of a fixed rate home loan? appeared first on PocketWise.

We’re talking, of course, about mortgage brokers. A mortgage broker essentially acts as a middleman between you and home loan providers, and really can improve the approval process from beginning to end. How?

Better rates: Mortgage brokers typically have access to a bunch of different products across a range of lenders, enabling them (and you!) to quickly compare rates and negotiate with banks to find the home loan that best suits your circumstances.

Industry pros: Do you know what an acceleration clause is? What happens when your guarantor goes missing? Any idea what constitutes a ‘reasonable’ lending fee? Mortgage brokers deal with home loans day in, day out, and can help you decipher contract small print to ensure you’re not getting ripped off.

Impartial advice: Unlike lenders, brokers have relatively little interest in which mortgage you ultimately choose. As such, they’re a pretty good source of impartial information and advice.

Strong relationships with banks: The chances of your mortgage application being approved largely comes down to whether a lender thinks it can trust you. Good brokers have strong relationships with many different banks, which can speed up the application process and boost your chances of securing a home loan.

Free: The icing on the cake is that using a mortgage broker is completely free! They get paid by the lender, so you don’t have to worry about yet another cost to buying a house.

While there are many benefits to using a broker, it’s important to keep your options open. In addition to talking to a broker, be sure to check our New Zealand mortgage rate comparison tool for up-to- date insight into the best home loan rates in Aotearoa.

The post Why use a mortgage broker? appeared first on PocketWise.

Apartment living is on the (high)rise

Mullets may have come and gone, and floral-print wallpaper might have fallen from retro into passé, but one trend that has remained constant over the years is the great Kiwi migration from house to apartment dwelling.

Nowhere is this movement more noticeable than in Auckland. The number of Auckland apartments skyrocketed from 9,876 in 2006 to 15,645 in 2013, according to census figures reported by Statistics New Zealand. This represents an incredible increase of 58.4 per cent!

Why are apartments becoming more popular?

It’s easy to understand why so many people are moving into apartments. Not only are they generally more affordable than free standing houses, they also offer a level of convenience that can’t be found in the suburbs. The practical benefits of living within close proximity to work, schools, transport routes and other key infrastructure should not be underestimated.

Can you use KiwiSaver to buy an apartment?

In a word, yes. While there are some conditions to leveraging your KiwiSaver to purchase a home, there are no restrictions on the type of property you can buy.

However, as Bankers’ Association Chief Executive Kirk Hope explained, mortgage providers may be more cautious when lending to apartment buyers.

“When lending on small apartments, the bank needs to consider if it will get its money back in case of default. It may not where demand for very small residences is limited,” said Mr Hope, as quoted by NZ Herald.

When you are ready to take the next step, talk to one of our great experts, their service is totally free!

The PocketWise Team

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Sounds like a good solution, right? Well, yes and no. Here are a few downsides to buying a house with your mates?

1. You’re liable for all of it

The financial outlay might be shared, but the liability is not. That is, if one of your friends happens to default on repayments, you could be held 100 percent accountable – regardless of who is technically at fault.

“…even if you are sharing the mortgage, you are still liable for all of it,” explained Andrew King of the New Zealand Property Investors Federation, as quoted by the NZ Herald.

You may be able to limit your liability to a certain extent by specifying details in a joint ownership agreement (which we high recommend doing!).

2. It can complicate the home loan approval process

While using NZ home loan comparison tools can help you streamline the mortgage application process, it’s important to keep in mind that buying a home with your mates introduces more uncertainty than purchasing solo.

As a result, some mortgage providers may be more hesitant to approve your home loan, while others don’t allow these types of mortgages at all.

3. You might lose your mates

It’s a sad fact of life that money and mates rarely mix well. Yes, the aforementioned joint ownership can be used to define what happens in certain scenarios, but the fact of the matter is financial disputes can and do arise when dealing with large amounts of money – regardless of how close you are with your mates.

Want to talk to a professional about whether this might be a good idea for you?  Get in touch with our friendly advisers who will be able to help you out!

The post What are the cons of buying a house with your mates? appeared first on PocketWise.

In addition, as homeowners, your parents have probably enjoyed superb capital gains over the years and – even if they’re still paying off their mortgage – are likely sitting a on a pretty piece of equity that could be used as financial leverage to help you purchase your first home.

How does it work?

A guarantor agreement can be a savvy way to secure a home loan if you’re coming up short on the deposit even after tapping into the HomeStart grant and other similar initiatives.

While details of the contract will vary, this arrangement essentially means that the guarantor agrees to pay off part (in some situations, all) of your mortgage amount should you happen to default on your debt for any reason. In most cases, your guarantor’s property will act as collateral.

What are the risks involved?

As you might imagine, there are some substantial risks involved for the guarantor under this arrangement. After all, if you fail to fulfil your financial obligations, your parents will be the ones responsible for paying off your loan, and could even face the possibility of losing their property to the bank.

Thankfully, there are a number of things you can do to minimise the risks, such as obtaining limited liability protection, taking out insurance and setting up the loan so that the guarantors’ portion is paid back first. This can be a fairly nuanced process, and the contract will be unique to your specific circumstances, so the best thing to do is get in touch with one of our partnered mortgage advisers who will be able to guide you in the right direction.

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So, why exactly are so many people opting for fixed rate home loans?

1. Certainty

2. Immunity to OCR changes

3. Special deals

The post What are the pros of a fixed rate home loan? appeared first on PocketWise.

What is the OCR?

The Reserve Bank of New Zealand (RBNZ) has the unenviable task of managing the country’s monetary policy and basically ensuring the economy doesn’t turn to custard. This responsibility includes setting the OCR, an interest rate that helps the country as a whole hit inflation targets (ideally around 2 per cent).

In August, the RBNZ reduced the OCR by 25 basis points to 2 per cent. A number of factors went into this decision, including weak global economic conditions, projected domestic growth, house price inflation and more.

Why should I care?

Financial mumbo jumbo aside, the OCR can have a very noticeable effect on your day to day life. How? Well, every bank in New Zealand is influenced to some extent by the RBNZ’s decisions, and will typically pass on OCR changes to customers. For example, if you have a floating rate home loan and the OCR goes up, it’s highly likely that your interest rates (and your repayments) will increase, too. Conversely, if the OCR drops, your repayments will probably go down.

It is important to note, however, that not all lenders will necessarily reflect OCR chances in their home loan rates. With this in mind, before committing to a loan it’s critical to compare mortgage rates in New Zealand to ensure you’re getting the home loan that not only best suits you as a buyer, but also makes the most of current market conditions.

Happy learning and comparing,

The PocketWise Team

The post What is the Official Cash Rate and why should I care? appeared first on PocketWise.

The issue is that a house that suits you now may not necessarily suit you further down the track. You can minimise this problem by hunting for a future-proof home.

Here are three of the most important qualities:

1. Proximity to good schools 

You might not be thinking about kids just yet, but purchasing a home in zone for a good school ensures you’re ready if/when that day comes. If you have kids, this is probably already high on your priority list.

As an added bonus, houses in close proximity to good schools often enjoy far better capital gains than those out of zone. For example, research from Bayleys found that properties inside Auckland’s coveted ‘Double Grammar Zone’ were worth $380,000 more than similar houses just metres outside the zone.

2. Office space

The nature of work is changing, with a study by MYOB revealing that almost half of all small- and medium-sized NZ businesses now have employees who work from home at least some of the time.

If you can see yourself working remotely, freelancing or running your own business in the next few years, look for a home with a space that could be used as an office.

3. Tech potential

As various types of technology become more accessible to consumers, it’s important to think about how your prospective home can make use of this upcoming innovation.

Things like residential solar power, internet-of-things and fibre internet are already becoming part of our everyday lives, and a property that can make full use of this (and future) tech is a great way to future proof your home and keep your lifestyle modern.

Got a future-proof home lined up? Check out our NZ mortgage rate calculator, compare home loan options and save big.

The post Buying a future-proof home: 3 things to look for appeared first on PocketWise.

While there are some pretty sweet benefits to buying your own home in New Zealand, sometimes it actually makes more sense to rent than purchase. Here are three reasons why renting can be superior:

1. Greater flexibility

When you lock yourself into a mortgage, it goes without saying that you sacrifice a little bit of freedom. Being able to meet your financial obligations and consistently make loan repayments often takes precedence over many other aspects of life.

In contrast, as a tenant you have relatively few commitments, enabling you to pursue other options such as travel, study and possible career changes.

2. Rent can be cheaper than mortgage repayments

Depending on market conditions, rental rates can be significantly lower than mortgage repayments. For example, the average Auckland house price increased by about $88,000 in the last year, while weekly rents increased just $1 across the same period, according to figures collated in the latest Trade Me Property Rental Index.

Of course, the real estate landscape is constantly shifting, making it important to compare New Zealand home loan rates to ensure you’re making a decision that best suits your financial circumstances.

3. No maintenance worries

Renting also eliminates most expenses associated with maintaining a property. As the New Zealand government’s Tenancy Services portal explained, landlords are responsible for repairing all damage caused by natural disasters, burglaries and fair wear and tear.

As a homeowner, guess who’s footing the bill if something breaks?

The post When does it make more sense to rent than buy? appeared first on PocketWise.