Interest rates down, confidence rising
Turmoil continues in global markets, but at home the mood seems to be improving slightly as local conditions remain steady.
Consumer confidence is on an upward trend, and 23% of Kiwis expect they’ll be better off this time next year. The report’s authors noted, “New Zealand consumers so far appear to be relatively unfazed by the recent bout of global volatility. The economy is turning higher (albeit slowly), and interest rates are lower.”
Lower interest rates will make big difference to indebted households, and some bank economists are predicting we’ll see an OCR of 2.5% by the end of the year. If you started the year paying 7% interest and you’re only paying 4.5% by December, that’s a lot more cash in your pocket: on a $500,000 loan, you’re around $800 a month better off. That’s led to greater demand: RBNZ reports that mortgage lending rose over the past six months for the first time since 2021.
Still, there are plenty of indicators that times are still tough: rents are down, the job market remains brutal, net migration is low, retail is weak, and there’s a glut of property listings on the market. Plus, there’s the possibility of a US or global recession. All these factors will drag on New Zealand’s economic recovery. As ASB’s economists put it: “If economic recoveries are cars, New Zealand is more Toyota Prius than Ferrari 458.”
But a Toyota will get you to your destination just as well as a Ferrari.
What’s happening at Zagga?
It’s been a busy few weeks at Zagga, with a number of loans successfully funded. While you will have noticed our rates dropping in line with the OCR and broader lending market, this has also led to the increased loan enquiry from quality borrowers.
Over the last few weeks we have seen investor interest rates sitting between the mid to high 7’s, LVR’s of less than 60% and security through residential property around the country.
Investor demand to fund loans still remains high, with our most recent loan funded in less than five minutes. However, more loan investment opportunities are enabling more investors to take advantage of strong returns.
In the immediate pipeline, we are currently assessing some strong loan investment opportunities, including a bridging loan secured against bare land in Wanaka and a residential equity release in Wellington. Alongside these, we are currently assessing more new loans daily.
We are still benefitting from the slow approval turnarounds at the major banks (and some non-banks), and there’s been an uptick in property investors coming back into the market.
From our perspective, it feels like there is more confidence in the property sector. Prices are far lower than their 2022 peak, and interest rates are looking more attractive, so many investors are hoping to buy now and reap the rewards in a few years when prices increase again