Mortgage rates forecast for 2020 - will they hit 2%?

Mortgage rates are likely to stay low in 2020 and banks may even start offering interest rates of 2 percent, mortgage brokers predict.

The OCR was cut by the Reserve Bank of New Zealand to 1.5 percent this year and the major retail banks followed suit and reduced mortgage rates to three to four percent.

Rupert Gough, CEO of mortgage advisers Mortgage Lab, reckons interest rates will fall lower still in 2020. “You may see a two at the front of some prices at some point,” he says.

Auckland house prices have already started to come back from last year’s hiatus and might continue to rise a bit more during the year, especially if LVR restrictions are reviewed any further which would see more investors return and first home buyers finding they have better ability to purchase.

“I’d like to see it happen. I think it would be good for those first home buyers who are struggling who maybe don’t have the full 20 per cent (deposit)," Gough says.

“We see a lot of people who could afford it (servicing a mortgage) but just can’t get that full 20 per cent to get in and are struggling to get the finance under 20 per cent, so we’d like to see the Government or the Reserve Bank address that.”

If the interest rate does fall again it will be for reasons outside of New Zealand’s control, such as the impact from the United States elections, but there probably isn’t a cause for concern.

“I mean, I don’t think the reduction of interest rates has started another bubble in property so there hasn’t been a concern about that as far as I’m aware, so there is room to move without causing prices to go horrendously high again.”

John Bolton, the founder of Squirrel mortgages, says house prices could go up slightly outside of Auckland - but Auckland prices are already high so if they do go up it probably won’t be by a lot.

He sees the year ahead as positive in a number of ways, with more people buying and selling.

Those who had put their lives on hold for the last couple of years waiting to see what would happen in the housing market have finally realised there is no apocalypse coming, he says.

“I think what’s happening at the moment is a lot of people who have been sitting on the fence for a few years are basically getting on with life and buying their next property,” he says.

The last few months has seen an upturn in people seeking mortgages, and in turn Bolton thinks listings - which were at a record low this year - will increase over the summer.

He also forecasts a lot more affordable housing coming on the market.

“In terms of entry level I think one of the big things that’s changing is that a lot of the property developers have kind of learned if they want to sell property they’ve got to get their price point better for entry level.

“There’s a lot more property that’s coming on the market in Auckland now that’s priced around $650,000 and that’s a big positive.”