By Frank Newman on 24th March 2017
Last Thursday Reserve Bank governor Graeme Wheeler left the official cash rate at 1.75%. There were no surprises in that, and most are expecting no change in the OCR anytime soon – maybe no change within the next couple of years. That means there is unlikely to be any dramatic rise in mortgage rates, although there may be some upward movement as interest rates are on the rise internationally, and that flows through to the price banks have to pay for money since they source a significant portion of their funding from overseas.
In making the announcement Mr Wheeler made the comment that New Zealand’s average house price was more than 50% above the last peak in 2007. The rate of increase had slowed in recent months and house prices in Auckland and Hamilton are easing.
The Governor repeated his concerns about the value of the kiwi dollar. Reserve Bank data shows just how strong our currency has been, especially since Brexit which was June last year. In the last 12 months our dollar has risen against all major currencies: up 22% against the UK Pound, 7% against the US dollar and Japanese yen, and 4.7% against the Australian dollar. That make buying goods from overseas cheaper, but it also means those earning revenue in an overseas currency receive less when they concert it into kiwi dollars.
As a matter of interest, according to Reserve Bank data, as at the end of January just under 80% of all mortgage lending was on a fixed rate, and about 20% was floating – at an average rate of 5.36%.
Of all fixed rate mortgage lending, just over 50% is fixed for one year or less (at an average rate of 4.81%), and 34% is for a term of between 1 and 2 years (average rate 4.49%). That means there will be a lot of property owners making decisions about their mortgage over the next year or two.
The standard one and two year mortgage rates are currently around 5% and 5.3% respectively. That means those who are renewing their fixed rate are likely to pay more.
I recently wrote about disruptive opportunities – Uber and Airbnb. In the last week or so a company called AgentAuction has been launched with the intention of disrupting the way those wanting to list a property for sale engage a real estate agent.
Their website says, “AgentAuction is a disruptive technology in real estate with enormous potential to improve outcomes for vendors, buyers and agents. Vendors get a better overview of an agent’s performance and fee levels, enabling more informed choice. Transaction costs overall are lowered so buyers can benefit. Finally, agents can focus their time and resources on what they’re best at: finding buyers and selling houses.”
What they have essentially created is a listing portal, which enables agents to “pitch” a proposal for your listing. It brings a real estate agent and homeowner together in a similar way to how Trademe operates Lifedirect but in that case they enable the life insurance premiums and policies of multiple companies to be compared online.
In the case of AgentAuction, a seller enters the address of the property that want to sell and some basic information about the property. They then choose up to three agents from those listed on the site. AgentAuction select two more agents and forward your details to all five who then have the opportunity to come back to you with their proposal. That proposal will include their fees, marketing plan and costs, experience, track record, and so on. You simply select the one that best suits your needs.
AgentAuction gets paid for their service by the real estate agent, from the agreed commission you pay the agent to sell your home. The advantage to the home seller is they have an efficient way of locating the best agent that suits their needs. The benefit for a real estate agent is that they have an opportunity to obtain a listing, which is quite often costly and time consuming.
It’s a win-win. The site is well worth clicking (agentauction.co.nz) and good on its founders for taking the initiative.