A Royle view on interest rates

Since the Reserve Bank cut the main trading Banks to 80% there has been a lot of talk about its effect, or not, on the Auckland market so I thought it opportune to have a look and see what’s happening.

From a lending point of view nothing has really changed as non-bank lenders have taken up the challenge and replaced the main banks with 90% lending at regular rates, both for owner occupied and investment. Other options have included the bank of Mum and Dad and we’ve certainly seen a few of these.

Many people have a distrust of non-bank lending, maybe with some justification going back to the GFC and finance company failures. But there is a world of difference between non-bank and finance companies and the bottom line is you have their money, not the other way round. Sovereign and Resimac are examples of non-bank lenders, both really strong and well funded by mainstream banks.

The main casualty of the RBNZ decision is the young Kiwi first home buyer. Their place has been taken by investors from both overseas and local, particularly at the lower end of the market where rents have increased directly as a result of the directive. We noticed a dramatic increase in investor enquiries post the start of the LVR restrictions.