New Zealand’s High Interest Rates...
I read an interesting article in the NZ Herald the other day: New Zealand’s mortgage rates are some of the highest amongst developed countries. Some brief highlights of the article:
Shaun Drylie, ASB product and strategy general manager, has said the reasons for our high interest rates are due to the health of our economy and because world interest rates are low (from governments having to cut interest rates to stimulate economies).
It could also be argued that our high interest rates are in place to curb inflation.
However, Nick Kotze, financial adviser of LoanMarket says “In economies where the interest rates are higher, you will also find that capital appreciation tends to be higher. Therefore the people who are paying the high interest rates are also bearing the fruit of their property appreciating more than in most of the OECD.”
Perhaps as a result of these higher interest rates, “A lot of people have given up hope and have resorted to living in expensive rental situations.” says Raewyn Cox, Federation of Family Budgeting chief executive.
I would like to think that with proper planning and focused motivation, the Kiwi dream of owning our own home never becomes out of reach. Dealing with buyers and sellers every day, I have a very good understanding of how many sacrifices must sometimes be made in order to achieve this dream.
So, how do we compare?
NZ v overseas
Long-term interest rates
Iceland 6.59%
Mexico 5.65%
New Zealand 4.2%
Australia 3.41%
United Kingdom 2.42%
United States 2.42%
France 1.41%
Netherlands 1.2%
Japan 0.49%
Source: OECD
Hard to believe (unless you were affected), but only 30-odd years ago in the 1980s, the average mortgage rate was a whopping 20.5%! Compare that to today, where our average rate currently is ~6–7%. Food for thought...
Read Anne Gibson’s full NZ Herald article here.