Watch and wait mortgage advice
Homeowners or buyers looking to fix their mortgage rates would be best to wait because of the spread of the coronavirus, Westpac economists say.
‘‘The economic impact of Covid-19 is likely to see the [Reserve Bank] cut rates further this year, and fixed-term mortgage rates may follow suit,’’ they state in their Weekly Economic Commentary.
‘‘The currently rampant housing market is likely to skid to a halt, with price growth slowing sharply in the June quarter.
‘‘That, combined with job losses and lower farm and business incomes, will have a secondary impact on consumer spending that could last longer than the immediate disruption from the virus.’’
But the economists stress it will be only a temporary disruption and predict economic recovery in the second half of the year.
‘‘We anticipate a period of above-normal GDP [gross domestic product] growth after the worst of the virus-related disruptions have passed, as the economy returns to a normal level of economic activity, catch-up production to restore depleted inventories occurs, and evenlower interest rates stimulate asset prices.
‘‘The consequence of this monetary easing will be even more stimulus for the housing market once the disruption from the virus has passed.’’
Westpac’s house price inflation forecasts have been reduced in the short run but increased from 2021.
‘‘Consistent with that, we forecast that the Reserve Bank will begin increasing the OCR [Official Cash Rate] again from early 2022,’’ the economists say.
In the meantime, they believe the best-value fixed rates are for one or two years.
‘‘Longer-term rates are high relative to where we think future short-term rates will go. That said, fixing for longer terms does offer security against future interest rate increases, and therefore may be preferred by those with low risk tolerance.’’
‘‘The currently rampant housing market is likely to skid to a halt, with price growth slowing sharply in the June quarter.’’