SPEAKER_01: 0:10

Hello and welcome back to that Home Loan Hub. Today we are bringing you one of your most favorite topics. That seems to be the topic of the year. Interest rates.

SPEAKER_00: 0:22

Oh, sorry, I've got James. Hey, I'm here too. Come on.

SPEAKER_01: 0:25

I completely forgot my chief economist. Um, James, let's talk about interest rates.

SPEAKER_00: 0:30

Well, it is interesting, isn't it? I see the pun. That was also I didn't even plan that. Uh no, so I I I mean I follow this really every week just because it's so important. Well, I've it's so important for our clients to get to get this kind of information. And so we'll probably, as you already know, the official cash rate was dropped a little a few weeks ago by the Reserve Bank uh 25 basis points or uh quarter of a percent. So and base basically what we've learned from there is there's gonna almost certainly do be two more interest rate cuts, uh one in October and another in November, taking the OCR down to 2.5%. So that is getting pretty low. I mean, uh and you may wonder why are we um why why is the Reserve Bank continuing to reduce uh these interest rates? Um basically the economy is stagnating, it's not doing well, you know, unemployment's going up a wee bit, people aren't feeling very confident. Um so the government, the Reserve Bank reduces these interest rates to encourage people to get out there and start spending again. And generally speaking, lower interest rates are good for people who want to buy a property or who already own one. Not so good for retired people who are earning an income, but from our side of the equation, it's good for people wanting to buy a property and it's good for people with with mortgages. So that's why we follow it so quick uh so closely.

SPEAKER_01: 2:00

And I believe it's again the largest refixes that are coming up, right? Um people that would have fixed three years ago when the rates were uh slightly higher or lower, depends when you're fixed, but you're coming off your refix, you know, you're probably sitting at six and a half percent, seven percent, and fixing it down at the moment, one of the lower rates is 4.72. If you go down to that, you know, you're saving yourself$200 a fortnight on average, depending on the average mortgage, but um makes a huge difference to people's budgets because suddenly you can actually go to the movies with the family. Yeah, you couldn't before, or you could start planning uh a road trip around New Zealand, or you could buy that extra um steak and support your butcher. So all those things contribute and have a trickle-down effect. But you're right, like the I think in the beginning of the year they were hopeful that the economy will recover faster and they were taking a very slow approach, but it's it's not.

SPEAKER_00: 2:58

It's not, no, no, it's it's and I think I saw I read something today or heard something yesterday on a podcast. Uh house property prices are actually decreased 0.6 of a percent over the year nationally. So that's quite interesting compared to somewhere like Australia, where they where the economy continues to sort of show growth, their property prices are actually growing. So if we compare with Australia, we're becoming it's much more affordable now for first home buyers to buy a property in New Zealand because of those house prices have come down a bit. Um interest rates are low. So if you weren't able to buy a a house a couple of years ago, because uh uh you weren't able to buy a house a couple of years ago, you're more than likely in a much different situation now where you can buy. Um so it's worth worth totally looking at that again. Uh the other interesting thing I I uh I came across a client yesterday who had a uh interest rate, he's coming off an interest rate of 3.25.

SPEAKER_01: 3:58

Wow. Must have been from the right in the You must have fixed it for like five years or something.

SPEAKER_00: 4:03

Yeah, and he was asking me, um, he was wanting to break it and get a and um and get a new and and and and and get a new um facility with a different bank. But I know because at first I was wondering why is the break fee only zero, you know. But obviously, you you if you're on that already low interest rate, you don't really want to break it and go into a and into a higher rate. Uh but yeah, so where where we're going to, because we know, because the market knows and the lenders know there's gonna be two more official cash rates, uh those interest rate cuts are already baked in largely to existing fixed term rates. So even though there's gonna be more official cash rates, it's uh unlikely we're gonna see huge changes to mortgage rates over those fixed term periods, especially the the longer term, you know, three, four years or whatever. They might they may not go any lower. Um and maybe the two-year one might drop a touch. But uh things would have to go a little quite pear-shaped, I think, for them to fall further. And do you know what I mean?

SPEAKER_01: 5:13

So But we are sitting at the lowest since 2022, I believe. You know, it's gone down under 5%. We haven't had it under five for such a long time. So if you are thinking about, oh, you know, what I should do, I mean, obviously getting financial advice is a first step. Because if everyone's situation is different, and I can't stress that enough every time we record this podcast. I can't stress enough that get financial advice, you know, the amount of times I see on Facebook pages going, oh, my interest rate's coming up, what should I do? And you ask the audience and you will get 100 different responses. Because for some people, they might be thinking of migrating to Australia and they might be looking at selling the house next year. So they don't want to fix for five years. But you might be having a baby this year and you might not want to go back to work for five years. So having stability over those five years and knowing exactly how much you're paying maybe exactly what you need instead of stressing out next year because it's suddenly the interest rate's gone back up again. Yeah, you know, so everyone's situation is different. So seek of financial advice and tailor that advice to your situation because that's what we do, right? We go, okay, maybe you should do six months or twelve months or eighteen months or five years, whatever. Depends on your situation.

SPEAKER_00: 6:26

Absolutely.

SPEAKER_01: 6:27

What should I do, James? Should I fix my interest rates?

SPEAKER_00: 6:30

I'd have to learn more about your situation, firstly, as your financial advisor. But if myself, if it was my I I would be locking in the longer. If I if I if I had nothing coming up, um, because you know, 4.72 over a number of years, um, that's pretty good. But you know, then the other thing, of course, is you don't want to lock in everything in the same term, possibly, because you know, let's say you do lock in 4.7 for three years, and then in three years, and you've got a million dollars worth of mortgage debt, and then in three years, you know, interest rates are ten percent, you'd be going from you you you have all your debt on the at 10% in three years' time. So sometimes we suggest you split it up a little bit so they rotate it at different periods.

SPEAKER_01: 7:20

Yeah, and that's exactly what I've done, right? I've got multiple properties, multiple lawns, and um I fixed them all at different rates. So every six months I've got something coming up. Yeah, and every six months I go, okay, let's fix this one now a little bit further, because I can see which one else is coming up in six months. And sometimes I win, sometimes I lose, you know. You just um think but yeah, there were a few that I fixed for two years because I was like, I don't want to um risk. I'm not going anywhere, I'm not selling anything anytime soon, and I just don't know what the government is doing because next year, remember it's election year as well. So again, we we just don't know.

SPEAKER_00: 7:54

Um we can't forecast like that, you know. There's just no way of knowing. We can we've got a pretty good idea of what's gonna happen this year for the rest of this year, but after the new year, I I think all bets are off. Um you just don't know what's what interest rates are gonna be like in three or four years. And you want to the reason why you want to rotate, have have the different um facilities coming off at different periods is just so that you don't expose yourself too much to something really bad or you're too much really good. You sort of just like what you're saying, every six months you might win sometimes, you might lose a little sometimes, but you're not gonna do really terribly um at any time.

SPEAKER_01: 8:32

Yeah. And I think like the average of seven-year rates, you know, they were always uh they'll look at the average of the seven. In the end, you end up winning because the rates are still historically low compared to, as you say, you know, 10% back in 2010, 11 when we were buying uh when I had my house.

SPEAKER_00: 8:49

I think when I first bought when I bought my first house, it was 10%.

SPEAKER_01: 8:53

Yeah, exactly. So we're still doing okay on the grand scheme of things, you know. So um absolutely awesome guys. Well, the takeaway today is if you are interested in interest rates, do reach out to us because we're here to help, right? We don't charge you a fee. And we sit down and we talk through. And if you are listening to this podcast and you're thinking, oh, my interest rates are coming up for refix, what should I do? Reach out. If you know any friends that are in a similar position, reach out. We'd love to help you. So thank you so much and stay tuned.