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Ilse Evans Asks Will Recent Bank Mortgage Wars Fuel More Sales/Higher Prices?

Thursday 24 January 2019, 9:09AM

By Beckie Wright

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Last month New Zealand's largest bank dropped its interest rate to 3.95 per cent - the lowest offered by a major bank since just after World War II. At the time, Loan Market mortgage adviser Bruce Patten said that spring is traditionally the time when banks released interest-rate specials, but the current low rates showed they were in a fight for customers.

"It means banks are trying to stimulate activity so they are giving up a bit of margin to get a crack at the small volume of lending around," he said. "It is great for the consumer because we have some really low rates." However, as Harcourt’s Ilse Evans is asking, does this mean we will now see higher prices and more sales in the New Year.

The banks' new low rates come after a near decade long boom of skyrocketing Auckland house prices drove values to unaffordable levels that locked many people out of home ownership. The subsequent drop in demand and new Government restrictions targeting investors led prices and sales volumes to then plateau and largely remained flat throughout last year.

Last November, the signs of a spring bounce combined with the banks' new low rates led some pundits to question whether there would now be a rush of new buyers entering the market, who would once again push prices up.

There is a proven relationship between lower interest rates, rising house prices and increases in household debt. In other words, lower interest rates usually stimulate the housing market and encourage individuals to borrow more and more. With this clear change in direction from the banks, there is a proven relationship between lower interest rates, rising house prices and increases in household debt.

Ilse Evans is the top agent Takapuna Office for 2017/2018, so to contact her, and for more information on selling my house Hauraki, real estate agents Hauraki and property valuations Hauraki please go to https://www.ilseevans.co.nz/testimonials/