October 18, 2025 • 41 mins
After yet another OCR cut, economists and mortgage holders alike are holding their breath for December - the last announcement of the year.
A new report from Infometrics suggests the Reserve Bank may be taking the cuts too far, and risking an overstimulated economy.
Most forecasts have predicted more cuts coming, but it's possible that Dr Anna Breman may have a different way of handling things.
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Episode Transcript
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Speaker 1 (00:05):
You're listening to the Weekend Collective podcast from News talksb
SO Center. Where is that the actors here?
Speaker 2 (00:16):
Yeah, and welcome back to the Weekend Collective.
Speaker 3 (00:31):
I'm Tim Beverage. This is the One Roof Radio show.
Now we want your calls for this out of course,
last last day you had the pleasure of just listening,
but we want your calls and participation. On eighty Texte
two by the way, just before we get into it,
looking head to laughter five for the parents squad, we're
talking with Kim Harvey about whether our kids are too
(00:52):
busy or whether maybe older generations like mine, whether we
were a bit slack or not. So, yeah, are our
kids just a bit too busy with all these extracurricular activities,
sports and all that? Or is it? Is it a
good thing? But right now it's the One Roof Radio
show and we want your calls one hundred and eighty
ten eighty because what we want to talk about is,
(01:12):
as you'll be aware, there has been another OCR cut.
Economists and mortgage holders holding their breath for another one
in December, possibly the last announcement of the year. But
there was a report by Inframetrics that reckons that the
Reserve Bank might be taking the cuts a bit too
far and we're risking an overstimulated economy. But are we
(01:34):
and what will that bleed into the property market? So
many of the forecasts have predicted more cuts for the
foreseeable future, so it's interesting to see that infometrics pushing
in the other direction. Of course, we've got a new
Reserve Bank governor who'll be settling in soon from Sweden,
doctor Anna Breman. What's she going to do? Or she's
(01:55):
just one vote? Will she? What do you think the
impact will be on that? And more importantly, it's one
thing to talk about the economy being stimulated by the
ocr what do you think it's going to do the
property market? We want to know what you reckon on
O eight one hundred and eighty ten eighty en text
nine two nine two and joining us to discuss all this.
He is Opas Opas Opes by the way, OPS Partner's
(02:18):
resident economist, and he's a sometime musical theater fan too
apparently and had his name is v McKnight.
Speaker 4 (02:24):
Goe to head.
Speaker 5 (02:24):
How are you going it's got?
Speaker 6 (02:25):
Especially with these interest rate cuts. I've been talking to
a lot of people who are very excited about it.
Just yesterday I was talking to somebody whose interest rate
is going from above seven percent to well under five
percent now and it has just such a big impact
on people's lives and you can just see monetary policy
and action. So she was telling me that while interest
(02:46):
rates have been very high, her and her kids and
her family have been eating a lot of past her
because it's very cheap. They've been buying Pam's brands. You know,
nothing wrong with that, of course, but they've been saving
as much money as they can or spending as little
as they can so that they can pay that big
interest rate. But as interest rates are coming down, this
same look, it's taking the pressure off. It means that
(03:07):
we can go out and spend a little bit more.
We can go down to a show on a Friday
night down where if they happen to live in Auckland,
and spend a little bit more at the supermarket. And
that is exactly what the Reserve Bank is looking for.
They want to see that people are out there spending more,
making the economy go a little bit faster. Because those
(03:27):
high interest rates, that has an impact on people. You
do spend less at the supermarket, and when interest rates
go down and your mortgage payment to the bank goes down,
it has a big impact for me personally. I'm coming
up for a refix in December, just about six weeks away.
I'm going to save two hundred and fifty dollars a
week once my interest rate rolls over. So you can
(03:48):
bet that means that, Yes, of course I'll probably do
the smart thing and pay down my mortgage a bit faster.
But it gives you that little bit of it gives
you some more breathing room as well.
Speaker 3 (03:58):
You sure you won't just sort of go out and
splash up a slap up binge at Missus Meggan's pie shop.
Speaker 6 (04:04):
I mean, I bet I've never heard of Missus Beckett's
pie shops. But you can tell from looking at me
him I'm good at eating pies.
Speaker 3 (04:12):
It's a black add of reference. There was a reference,
and I think it was the Elizabethan one referring to
Missus Megan's pies or something.
Speaker 6 (04:20):
Well, have a couple of extra pis just for you
to But you see the troublers when you've got a
podcast like me, when you sit around talking to people
about you know how to be better with money. You've
also got to take some of your own advice as well,
you see.
Speaker 3 (04:33):
Well, I don't know. I sometimes wonder whether there's one
thing you give advice. It's a bit like doctors who
will tell you that you shouldn't have too much salt
on your eggs. But then they'll be like for themselves,
a bit like well, everything and moderation. So you know,
we don't want to hold you too much to that head.
Speaker 5 (04:48):
Oh no, I hold myself to it quite a bit.
You see.
Speaker 6 (04:50):
Another thing that I'm really big on is canceling credit cards.
You see, Tim, I mean I'm going way off topic
because we here to talk about the ocr but.
Speaker 3 (04:58):
With a property bent, of course, But yes we will.
We'll talk all around it. Let's carry on.
Speaker 6 (05:02):
But with credit cards. You know, I've been so against
them for many years, but I always had just a
small one. I thought, no, I'm going to take my
own advice. I've got to chop this up because the
thing with credit cards is, because you're not spending your
own money, you feel like it's cheaper.
Speaker 5 (05:16):
In your mind.
Speaker 6 (05:17):
This is what the research shows, and so you end
up spending about sixteen percent more if you go to
the warehouse or farmers or Kmart, and you buy something
on your credit card as opposed to spending your own money,
because maybe you opt for the more expensive brand, whereas
if you were just paying for it with your own
debit card, you see the money coming out of your
bank account, and so you do end up just being
(05:40):
a bit more careful with money.
Speaker 3 (05:41):
You said something that made me, which ties into how
this is going to impact the property market, if at all,
because we have infometrics thinking that you know, that was
quite a big drop. But I have a sense, just
in a layman this way, because I'm not an economist,
that there did need to be something more, because people
are feeling just generally like God, the economy really is tough,
(06:04):
so too fi. I don't think two five was going
to cut it, which is why they went fero point five.
But here's you saying, I'm going to use it to
pay down more debt, and there'll be people who may
decide that they can perhaps do something nicer in their life,
maybe you know, and not having to have passed it
seven times a week. So that's why I reckon, I'm
(06:25):
not sure if this is going to really see some
significant impact or on the property market. I think this
is mostly going to be borne out by in the economy,
hopefully with people just having a little bit more freedom,
if that's the word, or a little less pressure on them.
Speaker 6 (06:41):
I do think that this cut was really about changing
the psychology of the country and saying, hey, we want
you to go out and spending. Because if the Reserve
Bank didn't do the double decker cut that we got,
they would have just cut once and then come back
six weeks later in November they would have cut again.
The final destination of where the ocr hasn't really changed
(07:02):
with that double decker cut. We're probably still going to
get down to two point one what is it we're
currently at two point five, will likely get another one,
get down to two point two five, and the Reserve
Bank over the with that cut only just a couple
of weeks ago, they didn't update their forecasts. You know,
it's basically the same of where they think we're eventually
going to go. But the fact that they said we're
(07:24):
going to come out and we're going to do a
double cut, rather than just coming and giving us another
one in six weeks time, I think that was to
say we're going to go quite aggressive go out and spend.
And actually, if I look at Tony Alexander, he's another
fantastic economist. He does a survey of just everyday people.
He says, well, does this change how you're going to
go out and spend? And the spending intentions have changed.
(07:47):
What that has shown is that people are more than
and I think in the last four years saying yes,
I do expect to go out and spend a bit
more now because we're more gagrators. Y'very low and actually,
with that double decker cut that we got from the
Reserve Bank, I am feeling like the conditions are going
to be quite favorable, the economies going to come back
on track. I feel a bit more secure in my
(08:08):
job and so I can go out and spend some money.
Speaker 3 (08:11):
Yeah, Because the other thing I wanted to throw out
there is what you reckon that while we have had
higher interest rates, I wonder where the people have also
learned in a way, not the tough but the practical way,
not just the academic way. They've learned what debt costs.
And so that's why I'm wondering if there are going
to be more people like you who will say okay,
(08:34):
I've got I'm gonna have another two and fifty bucks
a week, but instead of spending it, I'm going to
put that off my debt because I know how much
that debt's cast. You know what I mean. There's some
ways ways of learning about things that you can learn
it academically, but when you have to front up with
you know, I don't know a thousand bucks a week
just to pay your mortgage, you're aware that. Okay, the
reason is because this is how much I've borrowed, and
(08:54):
this is what the interest is. I want to get
that debt down, which is what you are saying, isn't it?
Speaker 1 (09:00):
Yeah?
Speaker 5 (09:00):
For me?
Speaker 6 (09:01):
For me, not all of that two hundred and fifty
bucks will go straight onto my mortgage.
Speaker 5 (09:05):
You know, I think I'll loosen about a little bit.
I'll go down to the pie shop and buy a
few more pies with your tim.
Speaker 6 (09:12):
But I do think that you are right that once
you've started paying a seven percent interest rate on your
mortgage and you really feel what that is like, you
probably are going to be more cautious around debt, whereas
if you've only took out a mortgage in twenty eighteen,
twenty nineteen, you've probably only ever experienced a four percent
(09:35):
interest rate until we got to those these last few years,
and then you start to think, Okay, maybe I do
need to be a bit cautious around debt and start
paying some of it down. Interestingly enough, I was talking
to a group of farmers and they are obviously experiencing
really good prices at the moment with the milk prices,
so they are really happy. Now you might think that
that means it's bonanza times down in Southland because all
(09:58):
of these farmers are going to go out and spend
this money. But farmers also have a lot of debt
and know what it's like to not make money some years,
and so a lot of them will say, great, we've
got We've got all this money coming in because our
export prices are really really strong at the moment. Radio
we're going to pay down some debt now.
Speaker 3 (10:16):
So what do you think people's I mean, I guess
we'll ask you what your plans would be in terms
of how how long you'd fixed for. Would you look
at fixing for longer or would you I've always erred
on this personally. It's never really hurt me too badly
to go short term short term, short term, which is
I think I might have gone for a year which
comes up in about February.
Speaker 4 (10:36):
Yeah.
Speaker 3 (10:36):
In fact, I was surprised that the interest rate that
I'm on is not going to be significantly improved on
I'm on about five point one nine percent or something.
Speaker 6 (10:44):
Oh yeah, so you'll be coming up for and you'll
probably early to mid next year, then.
Speaker 3 (10:48):
Up in February whatever. I whether it was six months
or a year I fixed, right, but it's up in
February or March like that.
Speaker 6 (10:54):
Yeah, okay, And so you're probably getting to that stage
where if you fix at five point one nine, going
down to four point four to nine, depending on how
large your mortgage is, might not feel that different. For
me personally, I'm a one year guy almost through and through.
Now that's just because typically if you look at the
last twenty years, just blindly fixing for the one year
would have served you pretty well. Now that doesn't mean blindly,
(11:18):
you know, just blindly one year, one year, we're here.
But having said that, you know, if you fixed for
five years back when the rate was two point nine
to nine percent, you would have been absolutely laughing all
the way to the bank. Because while everybody else is
paying a seven percent interest rate. If they do what
I do and just blindly locked in for the one year,
you would have been sitting pretty on your two point
(11:38):
nine to nine percent. Having said that, who really knows
about interest rates? You know where they're going to go up, down,
or stay the same. I've got a friend who is
very clued in on the market, constantly looking at interest rates,
and back when interest rates were up over seven percent,
he was absolutely convinced that interest rates were going to
(11:58):
stay high, and so he locked in and an interest
rate for five years starting with a six in front
of it. Now he's going to be very upset when
they've suddenly fallen. He then wanted to sell that property,
and I know you might want to talk about brake fees.
Later he had to pay over twenty thousand dollars in
break fees to get out of that very very high
(12:19):
interest rate. And so I'm just saying my point with
that is sometimes even very smart people who are constantly
looking at the data end up making, if I can say,
the wrong decision that was not particularly the best call
in that situation.
Speaker 3 (12:33):
Yeah, we'd love to know your thoughts on this because,
as we know, the Reserve Bank cut interest rates the
ocr B zero point five percent, and they did that
to add as an added stimulus or signaled the economy
we want to try and get things cracking, I guess.
But do you think firstly, do you think it's going
to have any impact on the property market in terms
(12:54):
of more activity And we haven't really dug into that
yet with Ed. But also what does it mean for
your plans on the ICR, because there is a contrary
opinion from infometrics that the Reserve Bank is walking a
fine line between kickstart and the economy and over stimulating
growth to the extent we might have a bit more inflation.
We might dig into that after the break. We want
(13:14):
your calls though, your reckons on what your plans are
on eight hundred and eighty ten eighty in text nine
two nine two. My guest is Ed McKnight. He's resident
economist at O Pair's Partners. We'll be back in just
a moment. Newstalk said, B. Yes, Newstalk said, B. This
is one rue radio show. My guest is Ed McKnight,
resident economist at opas Partners. Your reckons on what the
zero point five OCR cut means? For the property market,
(13:36):
but also what your plans are. What does it mean
for your plans? Do you think this is it? It's
not gonna get much better you're gonna fix for I
don't know what can we actually ed, We should just
have a quick look at what what can we generally
fix for? It's about a year at four point four
to nine or something.
Speaker 6 (13:48):
Yeah, four point four nine is pretty standard. And actually
just yesterday for my birthday, A and Z came out
and cut a whole heaper rates as well. There eighteen
month and their two year na sitting at four point
four nine percent as well, So, you know, all around,
pretty pretty good rates. I would say at about four
and a half percent.
Speaker 3 (14:05):
Be said that that is for if you've got a
special LVR under eighty percent.
Speaker 6 (14:10):
So if you've got more than twenty percent equity within
within your house. So pretty much everyone except first home
buyers would be able to get access to that.
Speaker 7 (14:17):
They must frustrate first tone bars wouldn't because you slog
it out, you finally get your deposit and they're like,
oh god, I'm still paying more than the next door
neighbor has got all that you know equity.
Speaker 6 (14:28):
Well, I mean that's just the way banks need to
do that because they are thinking about risk. Right, So
if you if you do have a ten percent deposit
or a fifteen percent deposit and you buy a house,
you are going to have to pay that higher interest
rate because it is just a bit more risky for them. Luckily, though,
as your house potentially goes up in value or you're
paying down the mortgage and you've got more equity in there,
(14:49):
you can convert across to the specials. The good thing
is if you're a Wellingtonian and you're bought with a
twenty percent deposit and we're on a special rate, and
then your house has gone down in value and you
no longer have twenty percent equity in there, most banks
are not pushing you up into those higher interest rates.
They'd let you just keep going on the specials.
Speaker 3 (15:06):
Good stuff. Right, Let's take some calls Calvin.
Speaker 4 (15:10):
Into your guest your guest n.
Speaker 3 (15:14):
E D as a headword, but just the first.
Speaker 4 (15:16):
Two good ed. There's an old saying a borrower or a.
Speaker 3 (15:25):
Lender neither a borrow nor borrower nor a lender be well,
no one to buy a house, would they?
Speaker 4 (15:31):
Well? Yes, you just save your money. It is possible.
But what I wanted to say was that I don't
know why, but a lot of people of your program
sort of says that that when interest rates go then oh,
that's great for everyone. Well it's not what I mean.
Interest rates lowering it means that I've got less income here,
so therefore I'll be spending less.
Speaker 3 (15:54):
You're right, I mean, actually that is you've just reminded
us of that. Really hasn't he ed that? Of course,
people who are saving and retired people who are living
off the interest from what's in the bank, not such
good news for them as it.
Speaker 6 (16:06):
You can take quite a large interest rate cat if
you've if they say'd a million bucks in the bank.
Just keep things real simple for us. You know, you
might find that you've lost ten thousand dollars or you're
not going to make ten thousand dollars over the next
year because interest rates have fallen, and so it's definitely
not good for everyone. I was there a careful with
my words before. I don't think I said it was
good for every one, because obviously it's also not good
for renters because they don't necessarily have a mortgage, so
(16:28):
it doesn't impact them at all. But if you are
a retiree, if you're somebody with a bit of money
and a term deposit, yeah, it might not work so
well for you if interest rates here, And that's important
to point out, Calvin.
Speaker 4 (16:37):
It it never seems to increase. If it is going
to increase, it's hardly anything at all really. But anyway,
with a bit of luck tonight, I'll have another twenty
three million in the bank.
Speaker 3 (16:50):
Yeah. Well, it would be fun doing the maths on that,
wouldn't it, Calvin, You know, working out, okay, this is
what I'm getting at this interest rate. That'll be a
fun equation to do. Although you probably wouldn't be worried
about the rate of return if you've got twenty three
million in the bank, would you.
Speaker 6 (17:03):
Well, the diyfficulty there that a lot of people don't
think about those. If you get your twenty three million,
you pop it in the bank at four percent or
whatever it happens to be at the moment. You still
got to pay tax on that, don't you. And so
that's the other side of the coin when you're investing
in tim deposits that a lot of people forget about.
Speaker 3 (17:18):
That's probably something thanks for call Calvin.
Speaker 7 (17:21):
I wonder if we'd ever.
Speaker 3 (17:21):
Do a money out on what if you've won lotter?
But the target market for that.
Speaker 5 (17:26):
No, people would love it because they we love to dream.
Speaker 6 (17:29):
I remember once when I think I must have been
an eighteen year old university student, and that was back
when the secret was all the rage, which was all
about you've got to visualize things and manifest things into
your life. I remember imagining that i'd won my eighteen
million dollars in what life would be like now? I
tell you what term I didn't win, because if I
did win, I probably wouldn't be sitting here talking to you.
Speaker 3 (17:49):
But that's an upside because you'd be like, I'm doing
this pure no, because you love it. You're just coming
for the joy of it.
Speaker 6 (17:55):
You'd be well, no, because if I was eighteen, I
never would have and one lot or I wouldn't be
doing the job that I am today. But if I
won tonight, Tim, I'd be back here next week talking to.
Speaker 5 (18:05):
You because I love it so much. Good on, ye, hey,
So let's get.
Speaker 3 (18:09):
To that question that we touched on, and you give
your reckons. We'd love to hear from you as well.
Oh wa one hundred and eighty ten to eighty and
not being an expert in property but having hosted a
property are you get a sense from talking to different
people about the energy in the market, And I looked
much just my uninformed reckon. I don't think this will
make much difference to the property market at all. I
(18:29):
think it's all going to be absorbed by people either
paying down debt or perhaps maybe buying that you know,
buying something other than pastor if I could put it
in the way that the terms that you framed it earlier.
Speaker 6 (18:39):
Well, if we think about that extra cut that we
got last week, what's that going to turn into in
terms of lower interest rates? Probably only about an extra
zero point one percent off the one year rate. So
the individual cut that we got, or the extra zero
point two five percent off the OCR because they were
likely going to cut the slow anyway they're just bringing
(19:00):
it forward, might not have much extra impact. But the
overall cuts that we've seen, taking the OCR from five
and a half percent down to two and a half percent,
knocking three percentage points off it, that in total should
have start to have a bit of an impact. One thing,
when we're talking about the property market, a lot of
people focus only on house prices. But one massive piece
(19:21):
of recovery that we've seen over the last two years
are house transactions. Now at the bottom of the market,
only about fifty eight thousand properties we're selling per year
in New Zealand. Now we're back up to about seventy
eight thousand properties a year, which is just under the
long term average. So we've seen this massive recovery in
terms of property transactions, but because there's been a lot
(19:44):
of listings on the market, you haven't necessarily seen that
translate into higher house prices yet. Having said that, we
do have the usual spring increase in house prices under
eighten Back in August we saw house prices increase zero
point three percent. Last month, September they were up zero
point eight percent according to the Real State Institute data.
Now that happens every single year, so we can't get
(20:05):
too excited about that.
Speaker 3 (20:07):
Last spring a bit of a dud though I think
last spring was a bit of a dud.
Speaker 6 (20:10):
Wasn't it a little bit more of a dud? But
you did see that increase. That's what I'm saying to
a lot of people. Don't get too excited about the
increases in house prices. We are seeing right now, you
can expect that house prices will go up a little bit,
just under a percent again in October. You'll see a
big increase in February. Some of that is just seasonal
because house prices do tend to rock it back in
(20:32):
spring in summer where there's a bit more activity and
we go to open homes. What's really going to be
the test is once we get to kind of early
next year, around April, if we're still seeing house prices
increase at that point, you'll know the recovery is underway.
Speaker 3 (20:45):
Yeah, of course there's a lot of to get our
heads around with that, isn't there. So where are we
at with activity in the market right now and where
we've been over winter? What's in terms of the supply
and demand as well?
Speaker 5 (20:58):
Well?
Speaker 6 (20:58):
Listenings have started to peter out, right, So we started
to see the number of stock on the market really
increase over the last couple of years to the highest
point that we'd had in about in a decade. Over
the last couple of months, it has started to it
has started to flatten out a bit, So it's not
like we're seeing this massive increase. What we will see
over the spring as we see every spring is that
(21:20):
we are going to see more listings come onto the
market because the buyers start coming out. And to be honest,
houses just look better in spring when it's sunny than
winter when the grass is all wet as well, which
is why we here in New Zealand all start to
list our houses in spring and summer, getting ready hopefully
to move out before Christmas.
Speaker 3 (21:37):
Because sellers also been holding back because the economic data
hasn't been great and if you didn't have to sell,
you're probably avoiding selling. Has that been Whereas with cheaper
interest rates, of course you think, well they're going to
be a bit more interested in the market. We've got spring,
maybe it is time to put the house on the market.
Is there anything to that or am I just making
things up as a go along.
Speaker 5 (21:55):
A little bit?
Speaker 6 (21:56):
But what we have seen since a little bit correct
is what I say, not a little bit its you
make it up to. But what was really interesting is
even though we didn't see house prices increase over the
last two years, you still saw this quite large increase
in the number of listings, people bringing their properties to market.
Some of that will be that people wanted to sell
(22:17):
when house prices were falling, perhaps in twenty twenty two,
but they were thinking, oh, I'll just hold off. I'll
just hold off a bit until we get a bit
of a recovery. But by the time they get to
twenty twenty four, twenty twenty five, they think, God, I've
been holding on for two or three years. I think
I'll just bite the bullet and listener house. And so
we've seen this quite large build up of listings on
(22:38):
the market, stock on the market. The good news now
is that we are seeing more of it start to move.
So if we look at a number of weeks worth
of stock on the market, or basically, in other words,
if nobody listened to another house, how many weeks worth
of inventory would we have left, or how many weeks
until we run out of houses? You know, that started
to come down a bit because the sales are picking
(22:58):
up as well.
Speaker 3 (22:59):
What do we know about a vestor activity at the
moment in the market.
Speaker 6 (23:02):
Well, my understanding is it starting to come back. I'll
tell you a little personal anecdote. Obviously, at OPA's Partners
we help people buy investment properties. We had an absolutely
stunning week this week. Thirty two investors have put properties
under contract. On a typical week, we might have eighteen
to twenty. So we are starting to personally see those
numbers rock it back. If I start to look at
(23:24):
the cotality data where they break down, you know, was
at first home buyers who were buying up as a
people moving. We are starting to see mortgaged borrow mortgaged
investors coming back. So not the people that Calvin was
talking about who buy without a mortgage, which don't tend
to be first home buyers, they tend to be investors.
But if we do look at the people who are
investing in houses and take mortgages out, they're starting to
(23:46):
come back into the market a little bit more.
Speaker 3 (23:48):
Actually just on that because yeah, I mean Calvin said,
you know, neither a borrow will ender b which is
just in La la land in terms of the average
New Zealander and how we get our access to property
to owning a property. I mean, hardly anyone's ever going
to save up and then buy a house for cash,
are they. Well, no one's going to do that unless
they've inherited a fortune.
Speaker 6 (24:07):
Well, the fact of the matter is, I was just
talking to a rival news organization yesterday. I won't name
names Tim, but and we were talking about the cheapest
area in New Zealand, which is in Gore, not Gore,
the city or the town I call it. Yeah, Matoda,
that's exactly right. You've rogged bvver. You're right to him
(24:27):
average value of a.
Speaker 3 (24:29):
Property stuffer that actually, by the way, it's probably because
I know that there's a place near Gore called Matara.
Speaker 5 (24:34):
Well, that's exactly right.
Speaker 6 (24:35):
It's the second largest town in the Gore district. And
two hundred and eighty eight thousand dollars is the average
value of the cheapest suburb in the country. And so
you know a first time buy is saving up two
hundred and eighty eight thousand dollars and moving down to Southland.
Look to be honest, I don't think many first home
buyers are going to be doing that. If you had
that kind of money, you'd end up putting a deposit down,
(24:57):
perhaps on something more expensive.
Speaker 3 (24:59):
Okay, we'd love your calls on this on O one
hundred and eighty ten eight A. itIt just specifically it's
around the interest rate and the oc are. How has
it affected? What are you going to do? What decision
A you're making? And to fix a deciding, hang on
a minute, and that's getting a bit cheaper, maybe I
will start looking for a property. Because the other side
of the property market is you've got a market that's
always there because there are always people who are needing
(25:21):
to who wanted to buy a house, they want somewhere
to live, rentings, you know, they want to get off.
How much of that, how much of the market is
actually sort of what I would call discretionary, you know,
as people who are waiting till the right moment, as
opposed to just you know, you're moving down, you're selling
a house, you're buying it. I mean, there's a certain
locked in level of activity. Surely, isn't there.
Speaker 6 (25:43):
Do you know what I've never looked at how much
is discretionory. But what we do know is that when
people think that house prices are going to go up,
they then think, Okay, I was planning on buying investment property.
I was planning on buying a home anyway in a
year's time or two years time. If I think house
price is going to go up, I better pull that
decision forward. Or if you're an investor and you're thinking, oh,
(26:05):
plan maybe perhaps get to go overseas and you're thinking, yeah,
I'm going to have to sell my house. I was
planning on doing it in two years. If you think
that house prices are going to fall, maybe you bring
that decision forward. So we do know that people push
forward or pull back their decision on whether they're going
to buy or sell based on what they think that
is going to happen in the market. But I don't
know exactly how many is discretionary. You know, who decides
(26:28):
not to buy. Having said that, in many ways, investors
don't have to purchase properties, right, A lot of people
choose to for their own wealth building. But if you
look at the amount that investors make up of the
market depending on the month, that's somewhere between thirty three
to thirty seven percent. So in many ways, all of
that is somewhat discretionary in terms of those purchases because
(26:51):
you don't need to necessarily purchase as an investor.
Speaker 3 (26:53):
You might want to though, yeah, we might actually want
to dig into just breaking mortgages as well, which you
might do after the break, but it Meanwhile, if you've
got any comments you like to add to the conversation
about what the change in the interest rate means, the
OCR wou'd love to hear from you. Will it just
affect the economy or will it actually have some flow
through effect into the realist, into the real estate market
as well. And if you're actually looking at buying a house,
does it make you think I'd better get a riggle
(27:14):
on or do you sort of think, okay, good, I've
got a bit more flexibility because my mortgage is going
to be a little cheaper than I've been planning on.
How does it affect your plans? Oh eight, one hundred
and eighty ten and eighty text nine nine two twenty
three minutes to five News Talks that Be with Tim Beverage.
My guest is Ed McKnight. He's a resident economist at
Opeas Partners. What's the website addressed for you guys again.
Speaker 6 (27:35):
Ed OPS Partners dot coded INZ. That's Opes Partners, dot
coded INZ.
Speaker 3 (27:40):
I wonder how many times you've spelt Opeas in your career,
because it's pretty much goes along every time, doesn't it.
Speaker 6 (27:44):
Well, all I'll say is I didn't name the company,
but back when we were much smaller, there was a
company called Opus Consultants. There are a big lot of engineers,
right and now that now I think they're called WSP
or something like that. And then when we ever would
go somewhere is oh, yeah, we're from opens, they'd be like, yeah,
I've heard of you. I'm like, no, you haven't. You
just think that was somebody else. But of course I
wouldn't say.
Speaker 3 (28:04):
That I've got an The one way you could do
it you just say it's like Hopes Partners, but it's
without the age.
Speaker 5 (28:11):
I'll give it a go, I'll give it a it's.
Speaker 3 (28:13):
Mopes Partners without the M And I think that's more confusing,
isn't it.
Speaker 5 (28:18):
Yeah.
Speaker 3 (28:19):
Anyway, Hey, look I want to talk about breaking mortgages
as well, because that's when cheap interest rates come into view.
There are a lot of people who look at what
they're stuck on because they thought, oh, look I need
to have some certainty I'm going to fix for three
or four or five years. I don't know actually personally
anyone has done that because most people I know I
always think short term, short term, short term.
Speaker 7 (28:40):
Short TAM.
Speaker 3 (28:40):
But my guess is, intuitively, why would the banks have
ever let you break a mortgage without pinging you for
every cent they were going to make out of you?
Under your current arrangement.
Speaker 6 (28:53):
Well, in many ways they do right. So legally, the banks,
if you decided to break your mortgage, the banks are
not able to profit from you. So, for instance, if
you were going to pay an extra ten thousand dollars
over the x compared to if they now take that
money and lead it to someone else, they can't charge
you twelve thousand dollars and say I'm going to punish
Tim for wanting to.
Speaker 5 (29:11):
Break his mortgage.
Speaker 6 (29:12):
They can only charge you what it actually costs them
to let you out of that contract. Now, that does
mean that some of the time, or in fact, quite
a bit of the time, breaking your mortgage may not
make sense, but there are some situations where it can,
right because they are only going to charge you. Typically,
if you fixed for five years, they're going to say, Okay,
what did it cost us to borrow some money and
(29:35):
lend it out to you for five years two years ago? Okay,
what's it going to cost us to lend out the
same money for five years now?
Speaker 5 (29:42):
Okay?
Speaker 6 (29:42):
The difference is a percent, So we're going to charge
Tim a percent. Okay, but what if the three year
rate has gone down by one point three percent? Okay,
now it could make sense to pay that break fee
and then go refix at a lower rate because that
rate has gone down by more. It's a bit math heavy,
but that's that's sometimes how it works.
Speaker 3 (30:01):
So if people are stuck on a rate where they're
looking enviously at what people are now borrowing for, who
would do I mean, the bank's not going to really well,
they're going to tell you what it's going to cost.
But in terms of doing in terms of working out
what you might do, would you talk to a mortgage
broker or would you just give it them to chat GP?
Speaker 6 (30:20):
Now you would one hundred percent talk to a mortgage advisor,
and I think it's very important that you do that
because this is quite math heavy. Now, I before coming
beyond here, I tested about three or four break feed
calculators on the Internet in New Zealand. There aren't that
many of them. Only one of them was really good,
the one on interest stock code dot NZ. All of
the others gave answers that I knew were completely incorrect.
(30:43):
But what you've got to figure out is if you
pay that break fee, and most of the time people
don't pay that in cash, right, So if you've got
a ten thousand dollars break fee, you might not have
ten thousand.
Speaker 3 (30:52):
Dollars to go on to your debt.
Speaker 6 (30:53):
Typically you would increase or typically a lot of borrowers
that I see increase the size of their mortgage in
order to pay that fee and then fix it at
a lower rates. You've got to figure out does that
actually make it for you?
Speaker 2 (31:05):
Now.
Speaker 6 (31:05):
I am a little bit of incentivized to say to people,
go and get a mortgage advisor, of course, because I
own a mortgage company has mortgages.
Speaker 5 (31:13):
But you don't have to use us.
Speaker 6 (31:15):
Just talk to a mortgage advisor to make sure that
you're running these numbers correctly, because what you don't want
to do is pay that enormous brak fee and then
find out two years later that, oh god, that actually
wasn't the right decision for us.
Speaker 3 (31:26):
Actually it's good. That's good to hear that that about
the break the mortgage brake fee calculator at intrastock coded
in Z. I mean it is sort of my go
to for just information on all sorts of things, isn't
it borrowing, saving, investing, banking? So yeah, so you can
go to intra stock code in ZEN. I literally as
you were talking, just put in break fee calculator and bingo, Yeah,
(31:49):
it's that easy.
Speaker 6 (31:49):
It's the best one that I found. But break fees
can be extraordinarily large. So did you know I couldn't
believe this. You know, an z two years ago today,
their five year rate was seven point zero nine percent.
Speaker 5 (32:03):
Isn't that enormous?
Speaker 3 (32:04):
That is quite high?
Speaker 6 (32:05):
Really, that is what they were advertising back then. Now,
let's say that you locked it in at that specific rate.
Speaker 3 (32:11):
Who would have locked in a rate that high? You'd
have to be I mean, I don't understand that, because
surely we all thought this was Do we all think
that that was the top of the.
Speaker 5 (32:21):
Well, I mean some people, a lot of people did.
Speaker 6 (32:24):
But the other thing is, as I said before, earlier
in the program, I had a friend who who thought
that two years ago that oh, yep, this is going
to be the new normal.
Speaker 5 (32:31):
This is what it is.
Speaker 6 (32:32):
And so they did decide to lock in for a
five year right, not necessarily a day in zet. Now,
having said that, that is the rate that they were advertising,
but often they might discount that by quite a lot.
But just for the purpose of these numbers, let's say
you locked in what they were advertising. Today, they're advertising
five point three nine percent for that same rate. Now,
if you've got three years left to go on a
(32:52):
five year mortgage, your break fee on a half a
million dollar mortgage would be thirty five thousand dollars. Now
that's an extreme example, and I've obviously chosen that to
make your wins and go, oh gosh, that's enormous. But
if you've done that, some people could be facing ten, twenty,
thirty thousand dollars break fees, depending on when you locked in,
how long you're locked in for, and how large your mortgages.
Speaker 3 (33:14):
There's another reason that you might do that is simply
because if you are struggling to meet and make ends
meet day by day, that okay, you might have to
tack another thirty five thousand bucks onto your mortgage, but
all of a sudden, your new mortgage rate makes your
weekly payments more manageable. I imagine that'd be quite a
common scenario if you're struggling with with a monthly weekly commitment.
(33:37):
It's going to it will change that inevitably, won't it.
Speaker 5 (33:39):
That's one reason.
Speaker 6 (33:40):
The other could be that if you need to buy
a new house, so let's say you know, Tim, you
and your partner or wife, you're down. You now got
another baby on the way, and now you're thinking, gosh,
now I'm going to have three kids. I better buy
a bigger house, so I'll sell this one. I've got
another year left on my mortgage, but I'm going to
need to break that so that i can sell this house,
pay down that mortgage, and take out a new one
(34:00):
for property.
Speaker 3 (34:01):
Don't you just transfer your mortgage over?
Speaker 6 (34:03):
Well, of course some banks let you do that, can't
necessarily always do that, but that's a situation where you
might need to break. Another situation you might need a
break is if you've got an investment property and you're
not going to just move that mortgage to another property.
If you have locked in for another year or two,
then you might have to just suck it up and
pay that break fee. So there are a couple of instances.
(34:24):
But one instance where it can also make sense is
sometimes people will come into a bit of money. Now,
I don't want to talk about Grandma Mabel dying, but
let's say she did, and you were really nice to
Grandma Mabel, and she left you one hundred thousand dollars,
and you think Oh, do you know what, Maybe I
will break my mortgage because then I can pay a
good chunk of it off or put maybe some of
(34:45):
it into a revolving credit or offset, and that's going
to save me a lot more interest if I break.
Now pay the braak fee, but I'm going to get
a lower interest rate, and actually I'm not going to
be paying interest on that extra hundred thousand dollars. So
people's situations are actually wildly different, to be honest him,
It's amazing just the variety of situations New Zealanders find
themselves in, and some people will be in that situation think, yep,
(35:09):
I'm going to pay the break fee because that makes
sense for my situation.
Speaker 3 (35:13):
All I think of is the people who have no
choice but to break it for adverse circumstances, And I
just sort of think that the tragedy is it does
you know, for those who don't want to need to,
It does tend to kick them while they're down, And
that's just an unfortunate side of life, isn't it.
Speaker 6 (35:26):
Well, it's it's the same with things like mortgage holidays.
Right now, mortgage holiday sounds lovely, Oh gosh, I'd love
a mortgage holiday, and of course these are typically reserved
for instances where you are a bit down on your
luck and you're struggling to pay your mortgage. A mortgage
holiday is nowhere near as sweet as it does sound,
because of course, if you decide that you're going to
stop paying interest for a time, they just add that
(35:47):
on to your loone and you start paying more interest
over the long term as well.
Speaker 3 (35:51):
So, by the way, if you are thinking of breaking
your mortgage, don't forget you should just go and talk
to a mortgage Advisor's funny I've talked about this before
on the show that years and years ago mortgage advisors
seem to be the exception to what the norm was
just people would appracice their own bank. But now, I
mean to me, most of the advice I get from
everyone has been on the show is that if you've
got a mortgage and you wanted to get a new rate,
(36:14):
always use a mortgage advisor or broker.
Speaker 6 (36:16):
And it's not necessarily that they're going to be able
to get you a lower rate. Necessarily, you might find
that you're going to pay exactly the same interest rate
whether you talk to a mortgage advisor or you talk
to a bank. The real benefit is in what we
call the structuring. How are we going to set it up?
Do you need to revolve in credit or is that
not going to work for you? Thinking through which interest
rate are you actually going to choose based on your circumstances.
(36:39):
If you really like certainty, maybe the five year rate
is the right one for you. And sometimes it's nice
if somebody asks you that question you didn't think to ask,
which is, well, are you planning on selling this property
anytime soon? Let's align that with the interest rate that
you're going to lock in for so we don't have
to break that a little later on.
Speaker 3 (36:56):
A little bit of feedback here, Hi, Tim, I disagree
that people feel more secure in jobs. The cash rate
cuts will be helping many to pay off debt and
save at a faster rate rather than spend up and
I do. I mean that's the question about what it's
going to do, you know, for the economy and what
people do with the extra money. Another one says that
the silly thing is at lowering mortgage rates is that mortgagees.
I'm not sure about this, and now a minority given
(37:18):
the people who are mortgage free and renters for me
and many others who don't have a mortgage, our deposits
have less earnings, so we spend less. So it swings
and around about skies, and that's more a comment about
what it's going to mean for the economy, isn't it.
Speaker 6 (37:29):
Well, generally, it is true obviously that if you bring
down interest rates, it's good for borrowers, it's bad for
people who are savers. But it does net out to
more spending overall. And it's not just about people with
mortgages versus people who who have money and term deposits.
It's also a lot around businesses and investments. So if
(37:50):
the interest rates come down, then a lot more investments
become profitable, a lot more businesses feel pretty good about
their earning prospects in the future, and they're more likely
to say, Okay, I'm going to go and borrow and
invest in a new piece of machinery or a new
new tractor that anst economic activity, or even if it
is in cash, you might say, well, I feel better
about my economic prospects and whether I'm going to have
(38:11):
lots of customers, so I am going to go and
make that investment as well.
Speaker 3 (38:15):
We're going to take a moment and come back with
the one roof property of the week, which is it's
an interesting property and I'm going to give you the
address for it when we come back in just a moment,
and our thoughts on it as well, because it's an
expensive property. If you had the money, would you be
buying that property. We'll let you know what ed and
I think in just a moment we'll be back. This
(38:37):
is News Talk c B. It's nine minutes to five.
Speaker 1 (38:40):
The one roof property of the week on the Weekend Collective.
Speaker 3 (38:46):
Yes, indeed, the one roof property of the week is. Look,
it's an interesting one and I'm not sure how to
I'm not sure how to sort of describe it, but
it is. I'll give it a go. So it's a
Claude Megson in Zia Award winning home and it's designed
for living. It's much admired and tightly held that it's
the celebrated architects house. Houses really come to market and
(39:09):
for good reason. Those lucky enough to live in them
understand how life enhancing they are. That's part of the blurb.
It's a two toned residence, the Norris House. It was
known to be one of Megson's own favorites. It's about
a manipulation of vertical space, apparently as a feature of
the interiors. It's positioned on the seven hundred and thirty
six square meters property, immaculately presented and maintained by the
(39:33):
current owners who've loved it since two thousand and nine. Anyway,
it's got exposed beams, it's got angles. I don't know
how to describe it. So I'm almost going to pass
this to Ed mckknight. It's got an RV of three
point at million. The estimate is about three point six million.
Speaker 5 (39:51):
All I'm going to say is that it's an acquired taste.
Speaker 3 (39:54):
Heed.
Speaker 6 (39:55):
Well, look, I think that I must just be a
country hit because I looked at this and thought this
is not my alley. Let me tell you, Tim, I
know we can't swear on this show, but there was
a there was a six letter word or actually seven
actually I can't even count. Something ugly as well. I
was thinking about it. But to be on, I'm going
(40:16):
to be honest with you, Tom, I'll tell you what
I really think. That's not I mean lovely house here
I am, you know, three bedrooms. Kis kind of think
three point six million, answered the Miller era. But I
just thought that what three point six million really gets
here these days, isn't that? I mean, if if there
was ever a house that showed you Zealands housing crisis,
(40:37):
this is it.
Speaker 3 (40:37):
I think that's a real burn. Look, it's funny because
I can't work out whether it's attractab or not. And
they are parts of it with the with the sort
of cylindrical sort of supports and everything that that sort
of do date it, aren't they. I think this is
a house for architecture fans. And if you're a fan
of Claude Megson, good luck to you, I'd say, because
(40:58):
you won't be bidding against Ed McKnight. Go and check
it out. I had the god I had addressed there?
What the hell is it?
Speaker 5 (41:06):
When ty Walton Street st
Speaker 1 (41:09):
For more from the Weekend Collective, listen live to News
talk Ed b weekends from three pm, or follow the
podcast on iHeartRadio.
You're listening to the Weekend Collective podcast from News talksb
SO Center. Where is that the actors here?
Speaker 2 (00:16):
Yeah, and welcome back to the Weekend Collective.
Speaker 3 (00:31):
I'm Tim Beverage. This is the One Roof Radio show.
Now we want your calls for this out of course,
last last day you had the pleasure of just listening,
but we want your calls and participation. On eighty Texte
two by the way, just before we get into it,
looking head to laughter five for the parents squad, we're
talking with Kim Harvey about whether our kids are too
(00:52):
busy or whether maybe older generations like mine, whether we
were a bit slack or not. So, yeah, are our
kids just a bit too busy with all these extracurricular activities,
sports and all that? Or is it? Is it a
good thing? But right now it's the One Roof Radio
show and we want your calls one hundred and eighty
ten eighty because what we want to talk about is,
(01:12):
as you'll be aware, there has been another OCR cut.
Economists and mortgage holders holding their breath for another one
in December, possibly the last announcement of the year. But
there was a report by Inframetrics that reckons that the
Reserve Bank might be taking the cuts a bit too
far and we're risking an overstimulated economy. But are we
(01:34):
and what will that bleed into the property market? So
many of the forecasts have predicted more cuts for the
foreseeable future, so it's interesting to see that infometrics pushing
in the other direction. Of course, we've got a new
Reserve Bank governor who'll be settling in soon from Sweden,
doctor Anna Breman. What's she going to do? Or she's
(01:55):
just one vote? Will she? What do you think the
impact will be on that? And more importantly, it's one
thing to talk about the economy being stimulated by the
ocr what do you think it's going to do the
property market? We want to know what you reckon on
O eight one hundred and eighty ten eighty en text
nine two nine two and joining us to discuss all this.
He is Opas Opas Opes by the way, OPS Partner's
(02:18):
resident economist, and he's a sometime musical theater fan too
apparently and had his name is v McKnight.
Speaker 4 (02:24):
Goe to head.
Speaker 5 (02:24):
How are you going it's got?
Speaker 6 (02:25):
Especially with these interest rate cuts. I've been talking to
a lot of people who are very excited about it.
Just yesterday I was talking to somebody whose interest rate
is going from above seven percent to well under five
percent now and it has just such a big impact
on people's lives and you can just see monetary policy
and action. So she was telling me that while interest
(02:46):
rates have been very high, her and her kids and
her family have been eating a lot of past her
because it's very cheap. They've been buying Pam's brands. You know,
nothing wrong with that, of course, but they've been saving
as much money as they can or spending as little
as they can so that they can pay that big
interest rate. But as interest rates are coming down, this
same look, it's taking the pressure off. It means that
(03:07):
we can go out and spend a little bit more.
We can go down to a show on a Friday
night down where if they happen to live in Auckland,
and spend a little bit more at the supermarket. And
that is exactly what the Reserve Bank is looking for.
They want to see that people are out there spending more,
making the economy go a little bit faster. Because those
(03:27):
high interest rates, that has an impact on people. You
do spend less at the supermarket, and when interest rates
go down and your mortgage payment to the bank goes down,
it has a big impact for me personally. I'm coming
up for a refix in December, just about six weeks away.
I'm going to save two hundred and fifty dollars a
week once my interest rate rolls over. So you can
(03:48):
bet that means that, Yes, of course I'll probably do
the smart thing and pay down my mortgage a bit faster.
But it gives you that little bit of it gives
you some more breathing room as well.
Speaker 3 (03:58):
You sure you won't just sort of go out and
splash up a slap up binge at Missus Meggan's pie shop.
Speaker 6 (04:04):
I mean, I bet I've never heard of Missus Beckett's
pie shops. But you can tell from looking at me
him I'm good at eating pies.
Speaker 3 (04:12):
It's a black add of reference. There was a reference,
and I think it was the Elizabethan one referring to
Missus Megan's pies or something.
Speaker 6 (04:20):
Well, have a couple of extra pis just for you
to But you see the troublers when you've got a
podcast like me, when you sit around talking to people
about you know how to be better with money. You've
also got to take some of your own advice as well,
you see.
Speaker 3 (04:33):
Well, I don't know. I sometimes wonder whether there's one
thing you give advice. It's a bit like doctors who
will tell you that you shouldn't have too much salt
on your eggs. But then they'll be like for themselves,
a bit like well, everything and moderation. So you know,
we don't want to hold you too much to that head.
Speaker 5 (04:48):
Oh no, I hold myself to it quite a bit.
You see.
Speaker 6 (04:50):
Another thing that I'm really big on is canceling credit cards.
You see, Tim, I mean I'm going way off topic
because we here to talk about the ocr but.
Speaker 3 (04:58):
With a property bent, of course, But yes we will.
We'll talk all around it. Let's carry on.
Speaker 6 (05:02):
But with credit cards. You know, I've been so against
them for many years, but I always had just a
small one. I thought, no, I'm going to take my
own advice. I've got to chop this up because the
thing with credit cards is, because you're not spending your
own money, you feel like it's cheaper.
Speaker 5 (05:16):
In your mind.
Speaker 6 (05:17):
This is what the research shows, and so you end
up spending about sixteen percent more if you go to
the warehouse or farmers or Kmart, and you buy something
on your credit card as opposed to spending your own money,
because maybe you opt for the more expensive brand, whereas
if you were just paying for it with your own
debit card, you see the money coming out of your
bank account, and so you do end up just being
(05:40):
a bit more careful with money.
Speaker 3 (05:41):
You said something that made me, which ties into how
this is going to impact the property market, if at all,
because we have infometrics thinking that you know, that was
quite a big drop. But I have a sense, just
in a layman this way, because I'm not an economist,
that there did need to be something more, because people
are feeling just generally like God, the economy really is tough,
(06:04):
so too fi. I don't think two five was going
to cut it, which is why they went fero point five.
But here's you saying, I'm going to use it to
pay down more debt, and there'll be people who may
decide that they can perhaps do something nicer in their life,
maybe you know, and not having to have passed it
seven times a week. So that's why I reckon, I'm
(06:25):
not sure if this is going to really see some
significant impact or on the property market. I think this
is mostly going to be borne out by in the economy,
hopefully with people just having a little bit more freedom,
if that's the word, or a little less pressure on them.
Speaker 6 (06:41):
I do think that this cut was really about changing
the psychology of the country and saying, hey, we want
you to go out and spending. Because if the Reserve
Bank didn't do the double decker cut that we got,
they would have just cut once and then come back
six weeks later in November they would have cut again.
The final destination of where the ocr hasn't really changed
(07:02):
with that double decker cut. We're probably still going to
get down to two point one what is it we're
currently at two point five, will likely get another one,
get down to two point two five, and the Reserve
Bank over the with that cut only just a couple
of weeks ago, they didn't update their forecasts. You know,
it's basically the same of where they think we're eventually
going to go. But the fact that they said we're
(07:24):
going to come out and we're going to do a
double cut, rather than just coming and giving us another
one in six weeks time, I think that was to
say we're going to go quite aggressive go out and spend.
And actually, if I look at Tony Alexander, he's another
fantastic economist. He does a survey of just everyday people.
He says, well, does this change how you're going to
go out and spend? And the spending intentions have changed.
(07:47):
What that has shown is that people are more than
and I think in the last four years saying yes,
I do expect to go out and spend a bit
more now because we're more gagrators. Y'very low and actually,
with that double decker cut that we got from the
Reserve Bank, I am feeling like the conditions are going
to be quite favorable, the economies going to come back
on track. I feel a bit more secure in my
(08:08):
job and so I can go out and spend some money.
Speaker 3 (08:11):
Yeah, Because the other thing I wanted to throw out
there is what you reckon that while we have had
higher interest rates, I wonder where the people have also
learned in a way, not the tough but the practical way,
not just the academic way. They've learned what debt costs.
And so that's why I'm wondering if there are going
to be more people like you who will say okay,
(08:34):
I've got I'm gonna have another two and fifty bucks
a week, but instead of spending it, I'm going to
put that off my debt because I know how much
that debt's cast. You know what I mean. There's some
ways ways of learning about things that you can learn
it academically, but when you have to front up with
you know, I don't know a thousand bucks a week
just to pay your mortgage, you're aware that. Okay, the
reason is because this is how much I've borrowed, and
(08:54):
this is what the interest is. I want to get
that debt down, which is what you are saying, isn't it?
Speaker 1 (09:00):
Yeah?
Speaker 5 (09:00):
For me?
Speaker 6 (09:01):
For me, not all of that two hundred and fifty
bucks will go straight onto my mortgage.
Speaker 5 (09:05):
You know, I think I'll loosen about a little bit.
I'll go down to the pie shop and buy a
few more pies with your tim.
Speaker 6 (09:12):
But I do think that you are right that once
you've started paying a seven percent interest rate on your
mortgage and you really feel what that is like, you
probably are going to be more cautious around debt, whereas
if you've only took out a mortgage in twenty eighteen,
twenty nineteen, you've probably only ever experienced a four percent
(09:35):
interest rate until we got to those these last few years,
and then you start to think, Okay, maybe I do
need to be a bit cautious around debt and start
paying some of it down. Interestingly enough, I was talking
to a group of farmers and they are obviously experiencing
really good prices at the moment with the milk prices,
so they are really happy. Now you might think that
that means it's bonanza times down in Southland because all
(09:58):
of these farmers are going to go out and spend
this money. But farmers also have a lot of debt
and know what it's like to not make money some years,
and so a lot of them will say, great, we've
got We've got all this money coming in because our
export prices are really really strong at the moment. Radio
we're going to pay down some debt now.
Speaker 3 (10:16):
So what do you think people's I mean, I guess
we'll ask you what your plans would be in terms
of how how long you'd fixed for. Would you look
at fixing for longer or would you I've always erred
on this personally. It's never really hurt me too badly
to go short term short term, short term, which is
I think I might have gone for a year which
comes up in about February.
Speaker 4 (10:36):
Yeah.
Speaker 3 (10:36):
In fact, I was surprised that the interest rate that
I'm on is not going to be significantly improved on
I'm on about five point one nine percent or something.
Speaker 6 (10:44):
Oh yeah, so you'll be coming up for and you'll
probably early to mid next year, then.
Speaker 3 (10:48):
Up in February whatever. I whether it was six months
or a year I fixed, right, but it's up in
February or March like that.
Speaker 6 (10:54):
Yeah, okay, And so you're probably getting to that stage
where if you fix at five point one nine, going
down to four point four to nine, depending on how
large your mortgage is, might not feel that different. For
me personally, I'm a one year guy almost through and through.
Now that's just because typically if you look at the
last twenty years, just blindly fixing for the one year
would have served you pretty well. Now that doesn't mean blindly,
(11:18):
you know, just blindly one year, one year, we're here.
But having said that, you know, if you fixed for
five years back when the rate was two point nine
to nine percent, you would have been absolutely laughing all
the way to the bank. Because while everybody else is
paying a seven percent interest rate. If they do what
I do and just blindly locked in for the one year,
you would have been sitting pretty on your two point
(11:38):
nine to nine percent. Having said that, who really knows
about interest rates? You know where they're going to go up, down,
or stay the same. I've got a friend who is
very clued in on the market, constantly looking at interest rates,
and back when interest rates were up over seven percent,
he was absolutely convinced that interest rates were going to
(11:58):
stay high, and so he locked in and an interest
rate for five years starting with a six in front
of it. Now he's going to be very upset when
they've suddenly fallen. He then wanted to sell that property,
and I know you might want to talk about brake fees.
Later he had to pay over twenty thousand dollars in
break fees to get out of that very very high
(12:19):
interest rate. And so I'm just saying my point with
that is sometimes even very smart people who are constantly
looking at the data end up making, if I can say,
the wrong decision that was not particularly the best call
in that situation.
Speaker 3 (12:33):
Yeah, we'd love to know your thoughts on this because,
as we know, the Reserve Bank cut interest rates the
ocr B zero point five percent, and they did that
to add as an added stimulus or signaled the economy
we want to try and get things cracking, I guess.
But do you think firstly, do you think it's going
to have any impact on the property market in terms
(12:54):
of more activity And we haven't really dug into that
yet with Ed. But also what does it mean for
your plans on the ICR, because there is a contrary
opinion from infometrics that the Reserve Bank is walking a
fine line between kickstart and the economy and over stimulating
growth to the extent we might have a bit more inflation.
We might dig into that after the break. We want
(13:14):
your calls though, your reckons on what your plans are
on eight hundred and eighty ten eighty in text nine
two nine two. My guest is Ed McKnight. He's resident
economist at O Pair's Partners. We'll be back in just
a moment. Newstalk said, B. Yes, Newstalk said, B. This
is one rue radio show. My guest is Ed McKnight,
resident economist at opas Partners. Your reckons on what the
zero point five OCR cut means? For the property market,
(13:36):
but also what your plans are. What does it mean
for your plans? Do you think this is it? It's
not gonna get much better you're gonna fix for I
don't know what can we actually ed, We should just
have a quick look at what what can we generally
fix for? It's about a year at four point four
to nine or something.
Speaker 6 (13:48):
Yeah, four point four nine is pretty standard. And actually
just yesterday for my birthday, A and Z came out
and cut a whole heaper rates as well. There eighteen
month and their two year na sitting at four point
four nine percent as well, So, you know, all around,
pretty pretty good rates. I would say at about four
and a half percent.
Speaker 3 (14:05):
Be said that that is for if you've got a
special LVR under eighty percent.
Speaker 6 (14:10):
So if you've got more than twenty percent equity within
within your house. So pretty much everyone except first home
buyers would be able to get access to that.
Speaker 7 (14:17):
They must frustrate first tone bars wouldn't because you slog
it out, you finally get your deposit and they're like,
oh god, I'm still paying more than the next door
neighbor has got all that you know equity.
Speaker 6 (14:28):
Well, I mean that's just the way banks need to
do that because they are thinking about risk. Right, So
if you if you do have a ten percent deposit
or a fifteen percent deposit and you buy a house,
you are going to have to pay that higher interest
rate because it is just a bit more risky for them. Luckily, though,
as your house potentially goes up in value or you're
paying down the mortgage and you've got more equity in there,
(14:49):
you can convert across to the specials. The good thing
is if you're a Wellingtonian and you're bought with a
twenty percent deposit and we're on a special rate, and
then your house has gone down in value and you
no longer have twenty percent equity in there, most banks
are not pushing you up into those higher interest rates.
They'd let you just keep going on the specials.
Speaker 3 (15:06):
Good stuff. Right, Let's take some calls Calvin.
Speaker 4 (15:10):
Into your guest your guest n.
Speaker 3 (15:14):
E D as a headword, but just the first.
Speaker 4 (15:16):
Two good ed. There's an old saying a borrower or a.
Speaker 3 (15:25):
Lender neither a borrow nor borrower nor a lender be well,
no one to buy a house, would they?
Speaker 4 (15:31):
Well? Yes, you just save your money. It is possible.
But what I wanted to say was that I don't
know why, but a lot of people of your program
sort of says that that when interest rates go then oh,
that's great for everyone. Well it's not what I mean.
Interest rates lowering it means that I've got less income here,
so therefore I'll be spending less.
Speaker 3 (15:54):
You're right, I mean, actually that is you've just reminded
us of that. Really hasn't he ed that? Of course,
people who are saving and retired people who are living
off the interest from what's in the bank, not such
good news for them as it.
Speaker 6 (16:06):
You can take quite a large interest rate cat if
you've if they say'd a million bucks in the bank.
Just keep things real simple for us. You know, you
might find that you've lost ten thousand dollars or you're
not going to make ten thousand dollars over the next
year because interest rates have fallen, and so it's definitely
not good for everyone. I was there a careful with
my words before. I don't think I said it was
good for every one, because obviously it's also not good
for renters because they don't necessarily have a mortgage, so
(16:28):
it doesn't impact them at all. But if you are
a retiree, if you're somebody with a bit of money
and a term deposit, yeah, it might not work so
well for you if interest rates here, And that's important
to point out, Calvin.
Speaker 4 (16:37):
It it never seems to increase. If it is going
to increase, it's hardly anything at all really. But anyway,
with a bit of luck tonight, I'll have another twenty
three million in the bank.
Speaker 3 (16:50):
Yeah. Well, it would be fun doing the maths on that,
wouldn't it, Calvin, You know, working out, okay, this is
what I'm getting at this interest rate. That'll be a
fun equation to do. Although you probably wouldn't be worried
about the rate of return if you've got twenty three
million in the bank, would you.
Speaker 6 (17:03):
Well, the diyfficulty there that a lot of people don't
think about those. If you get your twenty three million,
you pop it in the bank at four percent or
whatever it happens to be at the moment. You still
got to pay tax on that, don't you. And so
that's the other side of the coin when you're investing
in tim deposits that a lot of people forget about.
Speaker 3 (17:18):
That's probably something thanks for call Calvin.
Speaker 7 (17:21):
I wonder if we'd ever.
Speaker 3 (17:21):
Do a money out on what if you've won lotter?
But the target market for that.
Speaker 5 (17:26):
No, people would love it because they we love to dream.
Speaker 6 (17:29):
I remember once when I think I must have been
an eighteen year old university student, and that was back
when the secret was all the rage, which was all
about you've got to visualize things and manifest things into
your life. I remember imagining that i'd won my eighteen
million dollars in what life would be like now? I
tell you what term I didn't win, because if I
did win, I probably wouldn't be sitting here talking to you.
Speaker 3 (17:49):
But that's an upside because you'd be like, I'm doing
this pure no, because you love it. You're just coming
for the joy of it.
Speaker 6 (17:55):
You'd be well, no, because if I was eighteen, I
never would have and one lot or I wouldn't be
doing the job that I am today. But if I
won tonight, Tim, I'd be back here next week talking to.
Speaker 5 (18:05):
You because I love it so much. Good on, ye, hey,
So let's get.
Speaker 3 (18:09):
To that question that we touched on, and you give
your reckons. We'd love to hear from you as well.
Oh wa one hundred and eighty ten to eighty and
not being an expert in property but having hosted a
property are you get a sense from talking to different
people about the energy in the market, And I looked
much just my uninformed reckon. I don't think this will
make much difference to the property market at all. I
(18:29):
think it's all going to be absorbed by people either
paying down debt or perhaps maybe buying that you know,
buying something other than pastor if I could put it
in the way that the terms that you framed it earlier.
Speaker 6 (18:39):
Well, if we think about that extra cut that we
got last week, what's that going to turn into in
terms of lower interest rates? Probably only about an extra
zero point one percent off the one year rate. So
the individual cut that we got, or the extra zero
point two five percent off the OCR because they were
likely going to cut the slow anyway they're just bringing
(19:00):
it forward, might not have much extra impact. But the
overall cuts that we've seen, taking the OCR from five
and a half percent down to two and a half percent,
knocking three percentage points off it, that in total should
have start to have a bit of an impact. One thing,
when we're talking about the property market, a lot of
people focus only on house prices. But one massive piece
(19:21):
of recovery that we've seen over the last two years
are house transactions. Now at the bottom of the market,
only about fifty eight thousand properties we're selling per year
in New Zealand. Now we're back up to about seventy
eight thousand properties a year, which is just under the
long term average. So we've seen this massive recovery in
terms of property transactions, but because there's been a lot
(19:44):
of listings on the market, you haven't necessarily seen that
translate into higher house prices yet. Having said that, we
do have the usual spring increase in house prices under
eighten Back in August we saw house prices increase zero
point three percent. Last month, September they were up zero
point eight percent according to the Real State Institute data.
Now that happens every single year, so we can't get
(20:05):
too excited about that.
Speaker 3 (20:07):
Last spring a bit of a dud though I think
last spring was a bit of a dud.
Speaker 6 (20:10):
Wasn't it a little bit more of a dud? But
you did see that increase. That's what I'm saying to
a lot of people. Don't get too excited about the
increases in house prices. We are seeing right now, you
can expect that house prices will go up a little bit,
just under a percent again in October. You'll see a
big increase in February. Some of that is just seasonal
because house prices do tend to rock it back in
(20:32):
spring in summer where there's a bit more activity and
we go to open homes. What's really going to be
the test is once we get to kind of early
next year, around April, if we're still seeing house prices
increase at that point, you'll know the recovery is underway.
Speaker 3 (20:45):
Yeah, of course there's a lot of to get our
heads around with that, isn't there. So where are we
at with activity in the market right now and where
we've been over winter? What's in terms of the supply
and demand as well?
Speaker 5 (20:58):
Well?
Speaker 6 (20:58):
Listenings have started to peter out, right, So we started
to see the number of stock on the market really
increase over the last couple of years to the highest
point that we'd had in about in a decade. Over
the last couple of months, it has started to it
has started to flatten out a bit, So it's not
like we're seeing this massive increase. What we will see
over the spring as we see every spring is that
(21:20):
we are going to see more listings come onto the
market because the buyers start coming out. And to be honest,
houses just look better in spring when it's sunny than
winter when the grass is all wet as well, which
is why we here in New Zealand all start to
list our houses in spring and summer, getting ready hopefully
to move out before Christmas.
Speaker 3 (21:37):
Because sellers also been holding back because the economic data
hasn't been great and if you didn't have to sell,
you're probably avoiding selling. Has that been Whereas with cheaper
interest rates, of course you think, well they're going to
be a bit more interested in the market. We've got spring,
maybe it is time to put the house on the market.
Is there anything to that or am I just making
things up as a go along.
Speaker 5 (21:55):
A little bit?
Speaker 6 (21:56):
But what we have seen since a little bit correct
is what I say, not a little bit its you
make it up to. But what was really interesting is
even though we didn't see house prices increase over the
last two years, you still saw this quite large increase
in the number of listings, people bringing their properties to market.
Some of that will be that people wanted to sell
(22:17):
when house prices were falling, perhaps in twenty twenty two,
but they were thinking, oh, I'll just hold off. I'll
just hold off a bit until we get a bit
of a recovery. But by the time they get to
twenty twenty four, twenty twenty five, they think, God, I've
been holding on for two or three years. I think
I'll just bite the bullet and listener house. And so
we've seen this quite large build up of listings on
(22:38):
the market, stock on the market. The good news now
is that we are seeing more of it start to move.
So if we look at a number of weeks worth
of stock on the market, or basically, in other words,
if nobody listened to another house, how many weeks worth
of inventory would we have left, or how many weeks
until we run out of houses? You know, that started
to come down a bit because the sales are picking
(22:58):
up as well.
Speaker 3 (22:59):
What do we know about a vestor activity at the
moment in the market.
Speaker 6 (23:02):
Well, my understanding is it starting to come back. I'll
tell you a little personal anecdote. Obviously, at OPA's Partners
we help people buy investment properties. We had an absolutely
stunning week this week. Thirty two investors have put properties
under contract. On a typical week, we might have eighteen
to twenty. So we are starting to personally see those
numbers rock it back. If I start to look at
(23:24):
the cotality data where they break down, you know, was
at first home buyers who were buying up as a
people moving. We are starting to see mortgaged borrow mortgaged
investors coming back. So not the people that Calvin was
talking about who buy without a mortgage, which don't tend
to be first home buyers, they tend to be investors.
But if we do look at the people who are
investing in houses and take mortgages out, they're starting to
(23:46):
come back into the market a little bit more.
Speaker 3 (23:48):
Actually just on that because yeah, I mean Calvin said,
you know, neither a borrow will ender b which is
just in La la land in terms of the average
New Zealander and how we get our access to property
to owning a property. I mean, hardly anyone's ever going
to save up and then buy a house for cash,
are they. Well, no one's going to do that unless
they've inherited a fortune.
Speaker 6 (24:07):
Well, the fact of the matter is, I was just
talking to a rival news organization yesterday. I won't name
names Tim, but and we were talking about the cheapest
area in New Zealand, which is in Gore, not Gore,
the city or the town I call it. Yeah, Matoda,
that's exactly right. You've rogged bvver. You're right to him
(24:27):
average value of a.
Speaker 3 (24:29):
Property stuffer that actually, by the way, it's probably because
I know that there's a place near Gore called Matara.
Speaker 5 (24:34):
Well, that's exactly right.
Speaker 6 (24:35):
It's the second largest town in the Gore district. And
two hundred and eighty eight thousand dollars is the average
value of the cheapest suburb in the country. And so
you know a first time buy is saving up two
hundred and eighty eight thousand dollars and moving down to Southland.
Look to be honest, I don't think many first home
buyers are going to be doing that. If you had
that kind of money, you'd end up putting a deposit down,
(24:57):
perhaps on something more expensive.
Speaker 3 (24:59):
Okay, we'd love your calls on this on O one
hundred and eighty ten eight A. itIt just specifically it's
around the interest rate and the oc are. How has
it affected? What are you going to do? What decision
A you're making? And to fix a deciding, hang on
a minute, and that's getting a bit cheaper, maybe I
will start looking for a property. Because the other side
of the property market is you've got a market that's
always there because there are always people who are needing
(25:21):
to who wanted to buy a house, they want somewhere
to live, rentings, you know, they want to get off.
How much of that, how much of the market is
actually sort of what I would call discretionary, you know,
as people who are waiting till the right moment, as
opposed to just you know, you're moving down, you're selling
a house, you're buying it. I mean, there's a certain
locked in level of activity. Surely, isn't there.
Speaker 6 (25:43):
Do you know what I've never looked at how much
is discretionory. But what we do know is that when
people think that house prices are going to go up,
they then think, Okay, I was planning on buying investment property.
I was planning on buying a home anyway in a
year's time or two years time. If I think house
price is going to go up, I better pull that
decision forward. Or if you're an investor and you're thinking, oh,
(26:05):
plan maybe perhaps get to go overseas and you're thinking, yeah,
I'm going to have to sell my house. I was
planning on doing it in two years. If you think
that house prices are going to fall, maybe you bring
that decision forward. So we do know that people push
forward or pull back their decision on whether they're going
to buy or sell based on what they think that
is going to happen in the market. But I don't
know exactly how many is discretionary. You know, who decides
(26:28):
not to buy. Having said that, in many ways, investors
don't have to purchase properties, right, A lot of people
choose to for their own wealth building. But if you
look at the amount that investors make up of the
market depending on the month, that's somewhere between thirty three
to thirty seven percent. So in many ways, all of
that is somewhat discretionary in terms of those purchases because
(26:51):
you don't need to necessarily purchase as an investor.
Speaker 3 (26:53):
You might want to though, yeah, we might actually want
to dig into just breaking mortgages as well, which you
might do after the break, but it Meanwhile, if you've
got any comments you like to add to the conversation
about what the change in the interest rate means, the
OCR wou'd love to hear from you. Will it just
affect the economy or will it actually have some flow
through effect into the realist, into the real estate market
as well. And if you're actually looking at buying a house,
does it make you think I'd better get a riggle
(27:14):
on or do you sort of think, okay, good, I've
got a bit more flexibility because my mortgage is going
to be a little cheaper than I've been planning on.
How does it affect your plans? Oh eight, one hundred
and eighty ten and eighty text nine nine two twenty
three minutes to five News Talks that Be with Tim Beverage.
My guest is Ed McKnight. He's a resident economist at
Opeas Partners. What's the website addressed for you guys again.
Speaker 6 (27:35):
Ed OPS Partners dot coded INZ. That's Opes Partners, dot
coded INZ.
Speaker 3 (27:40):
I wonder how many times you've spelt Opeas in your career,
because it's pretty much goes along every time, doesn't it.
Speaker 6 (27:44):
Well, all I'll say is I didn't name the company,
but back when we were much smaller, there was a
company called Opus Consultants. There are a big lot of engineers,
right and now that now I think they're called WSP
or something like that. And then when we ever would
go somewhere is oh, yeah, we're from opens, they'd be like, yeah,
I've heard of you. I'm like, no, you haven't. You
just think that was somebody else. But of course I
wouldn't say.
Speaker 3 (28:04):
That I've got an The one way you could do
it you just say it's like Hopes Partners, but it's
without the age.
Speaker 5 (28:11):
I'll give it a go, I'll give it a it's.
Speaker 3 (28:13):
Mopes Partners without the M And I think that's more confusing,
isn't it.
Speaker 5 (28:18):
Yeah.
Speaker 3 (28:19):
Anyway, Hey, look I want to talk about breaking mortgages
as well, because that's when cheap interest rates come into view.
There are a lot of people who look at what
they're stuck on because they thought, oh, look I need
to have some certainty I'm going to fix for three
or four or five years. I don't know actually personally
anyone has done that because most people I know I
always think short term, short term, short term.
Speaker 7 (28:40):
Short TAM.
Speaker 3 (28:40):
But my guess is, intuitively, why would the banks have
ever let you break a mortgage without pinging you for
every cent they were going to make out of you?
Under your current arrangement.
Speaker 6 (28:53):
Well, in many ways they do right. So legally, the banks,
if you decided to break your mortgage, the banks are
not able to profit from you. So, for instance, if
you were going to pay an extra ten thousand dollars
over the x compared to if they now take that
money and lead it to someone else, they can't charge
you twelve thousand dollars and say I'm going to punish
Tim for wanting to.
Speaker 5 (29:11):
Break his mortgage.
Speaker 6 (29:12):
They can only charge you what it actually costs them
to let you out of that contract. Now, that does
mean that some of the time, or in fact, quite
a bit of the time, breaking your mortgage may not
make sense, but there are some situations where it can,
right because they are only going to charge you. Typically,
if you fixed for five years, they're going to say, Okay,
what did it cost us to borrow some money and
(29:35):
lend it out to you for five years two years ago? Okay,
what's it going to cost us to lend out the
same money for five years now?
Speaker 5 (29:42):
Okay?
Speaker 6 (29:42):
The difference is a percent, So we're going to charge
Tim a percent. Okay, but what if the three year
rate has gone down by one point three percent? Okay,
now it could make sense to pay that break fee
and then go refix at a lower rate because that
rate has gone down by more. It's a bit math heavy,
but that's that's sometimes how it works.
Speaker 3 (30:01):
So if people are stuck on a rate where they're
looking enviously at what people are now borrowing for, who
would do I mean, the bank's not going to really well,
they're going to tell you what it's going to cost.
But in terms of doing in terms of working out
what you might do, would you talk to a mortgage
broker or would you just give it them to chat GP?
Speaker 6 (30:20):
Now you would one hundred percent talk to a mortgage advisor,
and I think it's very important that you do that
because this is quite math heavy. Now, I before coming
beyond here, I tested about three or four break feed
calculators on the Internet in New Zealand. There aren't that
many of them. Only one of them was really good,
the one on interest stock code dot NZ. All of
the others gave answers that I knew were completely incorrect.
(30:43):
But what you've got to figure out is if you
pay that break fee, and most of the time people
don't pay that in cash, right, So if you've got
a ten thousand dollars break fee, you might not have
ten thousand.
Speaker 3 (30:52):
Dollars to go on to your debt.
Speaker 6 (30:53):
Typically you would increase or typically a lot of borrowers
that I see increase the size of their mortgage in
order to pay that fee and then fix it at
a lower rates. You've got to figure out does that
actually make it for you?
Speaker 2 (31:05):
Now.
Speaker 6 (31:05):
I am a little bit of incentivized to say to people,
go and get a mortgage advisor, of course, because I
own a mortgage company has mortgages.
Speaker 5 (31:13):
But you don't have to use us.
Speaker 6 (31:15):
Just talk to a mortgage advisor to make sure that
you're running these numbers correctly, because what you don't want
to do is pay that enormous brak fee and then
find out two years later that, oh god, that actually
wasn't the right decision for us.
Speaker 3 (31:26):
Actually it's good. That's good to hear that that about
the break the mortgage brake fee calculator at intrastock coded
in Z. I mean it is sort of my go
to for just information on all sorts of things, isn't
it borrowing, saving, investing, banking? So yeah, so you can
go to intra stock code in ZEN. I literally as
you were talking, just put in break fee calculator and bingo, Yeah,
(31:49):
it's that easy.
Speaker 6 (31:49):
It's the best one that I found. But break fees
can be extraordinarily large. So did you know I couldn't
believe this. You know, an z two years ago today,
their five year rate was seven point zero nine percent.
Speaker 5 (32:03):
Isn't that enormous?
Speaker 3 (32:04):
That is quite high?
Speaker 6 (32:05):
Really, that is what they were advertising back then. Now,
let's say that you locked it in at that specific rate.
Speaker 3 (32:11):
Who would have locked in a rate that high? You'd
have to be I mean, I don't understand that, because
surely we all thought this was Do we all think
that that was the top of the.
Speaker 5 (32:21):
Well, I mean some people, a lot of people did.
Speaker 6 (32:24):
But the other thing is, as I said before, earlier
in the program, I had a friend who who thought
that two years ago that oh, yep, this is going
to be the new normal.
Speaker 5 (32:31):
This is what it is.
Speaker 6 (32:32):
And so they did decide to lock in for a
five year right, not necessarily a day in zet. Now,
having said that, that is the rate that they were advertising,
but often they might discount that by quite a lot.
But just for the purpose of these numbers, let's say
you locked in what they were advertising. Today, they're advertising
five point three nine percent for that same rate. Now,
if you've got three years left to go on a
(32:52):
five year mortgage, your break fee on a half a
million dollar mortgage would be thirty five thousand dollars. Now
that's an extreme example, and I've obviously chosen that to
make your wins and go, oh gosh, that's enormous. But
if you've done that, some people could be facing ten, twenty,
thirty thousand dollars break fees, depending on when you locked in,
how long you're locked in for, and how large your mortgages.
Speaker 3 (33:14):
There's another reason that you might do that is simply
because if you are struggling to meet and make ends
meet day by day, that okay, you might have to
tack another thirty five thousand bucks onto your mortgage, but
all of a sudden, your new mortgage rate makes your
weekly payments more manageable. I imagine that'd be quite a
common scenario if you're struggling with with a monthly weekly commitment.
(33:37):
It's going to it will change that inevitably, won't it.
Speaker 5 (33:39):
That's one reason.
Speaker 6 (33:40):
The other could be that if you need to buy
a new house, so let's say you know, Tim, you
and your partner or wife, you're down. You now got
another baby on the way, and now you're thinking, gosh,
now I'm going to have three kids. I better buy
a bigger house, so I'll sell this one. I've got
another year left on my mortgage, but I'm going to
need to break that so that i can sell this house,
pay down that mortgage, and take out a new one
(34:00):
for property.
Speaker 3 (34:01):
Don't you just transfer your mortgage over?
Speaker 6 (34:03):
Well, of course some banks let you do that, can't
necessarily always do that, but that's a situation where you
might need to break. Another situation you might need a
break is if you've got an investment property and you're
not going to just move that mortgage to another property.
If you have locked in for another year or two,
then you might have to just suck it up and
pay that break fee. So there are a couple of instances.
(34:24):
But one instance where it can also make sense is
sometimes people will come into a bit of money. Now,
I don't want to talk about Grandma Mabel dying, but
let's say she did, and you were really nice to
Grandma Mabel, and she left you one hundred thousand dollars,
and you think Oh, do you know what, Maybe I
will break my mortgage because then I can pay a
good chunk of it off or put maybe some of
(34:45):
it into a revolving credit or offset, and that's going
to save me a lot more interest if I break.
Now pay the braak fee, but I'm going to get
a lower interest rate, and actually I'm not going to
be paying interest on that extra hundred thousand dollars. So
people's situations are actually wildly different, to be honest him,
It's amazing just the variety of situations New Zealanders find
themselves in, and some people will be in that situation think, yep,
(35:09):
I'm going to pay the break fee because that makes
sense for my situation.
Speaker 3 (35:13):
All I think of is the people who have no
choice but to break it for adverse circumstances, And I
just sort of think that the tragedy is it does
you know, for those who don't want to need to,
It does tend to kick them while they're down, And
that's just an unfortunate side of life, isn't it.
Speaker 6 (35:26):
Well, it's it's the same with things like mortgage holidays.
Right now, mortgage holiday sounds lovely, Oh gosh, I'd love
a mortgage holiday, and of course these are typically reserved
for instances where you are a bit down on your
luck and you're struggling to pay your mortgage. A mortgage
holiday is nowhere near as sweet as it does sound,
because of course, if you decide that you're going to
stop paying interest for a time, they just add that
(35:47):
on to your loone and you start paying more interest
over the long term as well.
Speaker 3 (35:51):
So, by the way, if you are thinking of breaking
your mortgage, don't forget you should just go and talk
to a mortgage Advisor's funny I've talked about this before
on the show that years and years ago mortgage advisors
seem to be the exception to what the norm was
just people would appracice their own bank. But now, I
mean to me, most of the advice I get from
everyone has been on the show is that if you've
got a mortgage and you wanted to get a new rate,
(36:14):
always use a mortgage advisor or broker.
Speaker 6 (36:16):
And it's not necessarily that they're going to be able
to get you a lower rate. Necessarily, you might find
that you're going to pay exactly the same interest rate
whether you talk to a mortgage advisor or you talk
to a bank. The real benefit is in what we
call the structuring. How are we going to set it up?
Do you need to revolve in credit or is that
not going to work for you? Thinking through which interest
rate are you actually going to choose based on your circumstances.
(36:39):
If you really like certainty, maybe the five year rate
is the right one for you. And sometimes it's nice
if somebody asks you that question you didn't think to ask,
which is, well, are you planning on selling this property
anytime soon? Let's align that with the interest rate that
you're going to lock in for so we don't have
to break that a little later on.
Speaker 3 (36:56):
A little bit of feedback here, Hi, Tim, I disagree
that people feel more secure in jobs. The cash rate
cuts will be helping many to pay off debt and
save at a faster rate rather than spend up and
I do. I mean that's the question about what it's
going to do, you know, for the economy and what
people do with the extra money. Another one says that
the silly thing is at lowering mortgage rates is that mortgagees.
I'm not sure about this, and now a minority given
(37:18):
the people who are mortgage free and renters for me
and many others who don't have a mortgage, our deposits
have less earnings, so we spend less. So it swings
and around about skies, and that's more a comment about
what it's going to mean for the economy, isn't it.
Speaker 6 (37:29):
Well, generally, it is true obviously that if you bring
down interest rates, it's good for borrowers, it's bad for
people who are savers. But it does net out to
more spending overall. And it's not just about people with
mortgages versus people who who have money and term deposits.
It's also a lot around businesses and investments. So if
(37:50):
the interest rates come down, then a lot more investments
become profitable, a lot more businesses feel pretty good about
their earning prospects in the future, and they're more likely
to say, Okay, I'm going to go and borrow and
invest in a new piece of machinery or a new
new tractor that anst economic activity, or even if it
is in cash, you might say, well, I feel better
about my economic prospects and whether I'm going to have
(38:11):
lots of customers, so I am going to go and
make that investment as well.
Speaker 3 (38:15):
We're going to take a moment and come back with
the one roof property of the week, which is it's
an interesting property and I'm going to give you the
address for it when we come back in just a moment,
and our thoughts on it as well, because it's an
expensive property. If you had the money, would you be
buying that property. We'll let you know what ed and
I think in just a moment we'll be back. This
(38:37):
is News Talk c B. It's nine minutes to five.
Speaker 1 (38:40):
The one roof property of the week on the Weekend Collective.
Speaker 3 (38:46):
Yes, indeed, the one roof property of the week is. Look,
it's an interesting one and I'm not sure how to
I'm not sure how to sort of describe it, but
it is. I'll give it a go. So it's a
Claude Megson in Zia Award winning home and it's designed
for living. It's much admired and tightly held that it's
the celebrated architects house. Houses really come to market and
(39:09):
for good reason. Those lucky enough to live in them
understand how life enhancing they are. That's part of the blurb.
It's a two toned residence, the Norris House. It was
known to be one of Megson's own favorites. It's about
a manipulation of vertical space, apparently as a feature of
the interiors. It's positioned on the seven hundred and thirty
six square meters property, immaculately presented and maintained by the
(39:33):
current owners who've loved it since two thousand and nine. Anyway,
it's got exposed beams, it's got angles. I don't know
how to describe it. So I'm almost going to pass
this to Ed mckknight. It's got an RV of three
point at million. The estimate is about three point six million.
Speaker 5 (39:51):
All I'm going to say is that it's an acquired taste.
Speaker 3 (39:54):
Heed.
Speaker 6 (39:55):
Well, look, I think that I must just be a
country hit because I looked at this and thought this
is not my alley. Let me tell you, Tim, I
know we can't swear on this show, but there was
a there was a six letter word or actually seven
actually I can't even count. Something ugly as well. I
was thinking about it. But to be on, I'm going
(40:16):
to be honest with you, Tom, I'll tell you what
I really think. That's not I mean lovely house here
I am, you know, three bedrooms. Kis kind of think
three point six million, answered the Miller era. But I
just thought that what three point six million really gets
here these days, isn't that? I mean, if if there
was ever a house that showed you Zealands housing crisis,
(40:37):
this is it.
Speaker 3 (40:37):
I think that's a real burn. Look, it's funny because
I can't work out whether it's attractab or not. And
they are parts of it with the with the sort
of cylindrical sort of supports and everything that that sort
of do date it, aren't they. I think this is
a house for architecture fans. And if you're a fan
of Claude Megson, good luck to you, I'd say, because
(40:58):
you won't be bidding against Ed McKnight. Go and check
it out. I had the god I had addressed there?
What the hell is it?
Speaker 5 (41:06):
When ty Walton Street st
Speaker 1 (41:09):
For more from the Weekend Collective, listen live to News
talk Ed b weekends from three pm, or follow the
podcast on iHeartRadio.
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