It’s a new financial year and we have certainly seen some very “interesting” changes in the propertymarket recently – particularly in light of announcements on March 23 from the Government. Investors seem to be getting hit hard with many of these changes, and at this point it becomes even more important to be all over your profit and loss statement to figure out where costs can be saved if looking to hold onto property for the long term.

I did find it interesting that there are many more cash buyers out there currently, but still the overwhelming majority of people carry mortgage debt due to the fact that property as an asset class is so expensive.

While there could be more potential changes announced in May (Financial Stability Report and Budget), at this stage we must look at our existing position and mortgage debt to figure out where we can save money with changes coming up.

Currently mortgage interest rates have not moved too much in the last month. Most market rates (from a main bank, and at or equal to 80% LVR) range between 2.29% and 2.99% from one-five years. We have also seen some other banks come back into the market on the 2.99% five year special – which disappeared for a while.

Although 2.99% for five years is a fantastic long-term rate and provides more certainty, for many buyers they are reconsidering whether the certainty is worth it when some of these new changes are proposed – particularly the removal of interest deductibility. If for example you are comparing a one-year rate of 2.29% and a five-year rate of 2.99%, there’s a 0.70% difference in cost. This equates to around $7,000 per year in real dollar costs based on a $1 million mortgage. If you are no longer able to write off the interest (which is a legitimate expense) then this adds a further layer of difficulty for longterm property investors.

That does not necessarily mean we will see everyone flocking to short-term rates and foregoing recent warnings of hedging your mortgage (by splitting with some debt on short-term and some debt on long-term). However it does mean that people will be more likely to consider shorter term mortgage rates when looking at the future expected performance of the asset.

Floating rates remain somewhat unchanged, anywhere between 4.40-4.59% for most main-banks, however most major banks also offer a floating discount on their floating rate if you ask for one. Kiwibank had done this and given everyone a 1% discount off their previous floating rate of 4.40%, so they now have the lowest floating rate of the main-banks at 3.40%.

When making fixed rate decisions it is worth determining not only with your mortgage adviser, but also getting an idea from your accountant on how the proposed tax changes are likely to affect you, because there is a direct relationship between that and the mortgage advice you are given. It might even be worth getting your mortgageadviser and accountant involved in the communications together.

The interest rates specified in this table were accurate on 11/03/2021. Interest rates are subject to change without notice. Different fees and charges apply to each loan depending on the mortgage lender. Seek expert advice to determine the mortgage lender that is right for you and your circumstances. A Disclosure Statement is available on request and free of charge. Data provided by tmmonline.nz