Debbie Roberts: RBNZ needs to bring OCR down "hard and fast"

You're listening to the Weekend Collective podcast from News Talks.

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Stun the sky like a tag and the viol Love.

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Business stuff.

I'm sun Stop and welcome back to the one. This is the week in Collective and this hour it's the one Rufe Radio show. I'm Tim Beveridge. If you missed a panel with a lovely panel actually because if well you have just joined, and if you've if you haven't joined, and I'll be flogging it to death the news that Wilhelmina Shrimpton, one of my panelists, had just got engaged to her lovely partner Ben O'Keefe, and we flogged that a little bit with the music and everything. But it

That's kind, but probably.

How are you anyway?

I'm good, I'm good.

You've been keeping yourself out of mischief?

Yes?

Absolutely, things are certainly getting busy at the moment.

Well, we're going to talk about the OCR because the Reserve Bank has dropped the OCR by fifty basis points. A lot of Now this is for you if you're listening. How far do you want it, want it need it to fall? And how fast should it fall? There's so many I mean basically should it, could it? Or what do you need it to fall? To the OCR Because a lot of commentary I've seen is that we know

He was originally talking about not reducing it until maybe middle of next year at one point. But I think, you know, in my opinion, I think he raised it too late and he's reduced it too late. He should have started reducing ages ago. I think, yeah, there's a lot of blood in the water at the moment.

Actually, I'm glad to hear you use a dramatic expression like that, because a lot of the time, the language of economics denies the human suffering that goes on when you raise an interest rate, and people if you have to have a mortgage sale, that is a massive, massive toll to take on any individual, and economists use the expression. I think Adrian Or used it. I'm not going to pick on him. He's using the language that he's accustomed to. But you know, there's going to be a little bit

Yeah, absolutely, And I think potentially the biggest issue at the moment is the pain that the economy is suffering. You know, to be fair, with banks testing affordability at much higher interest rates than they than are currently on offer. That's prevented a lot of people from getting into mortgage

Is there also have banking practices in the last twenty years or so changed a bit.

So they've changed dramatically.

Okay, good. I do remember the black and white section of the property whatever it was that you'd read, and that's the mortgage sales used to be quite thick, and you just observe that there are fewer, so obviously the banks are doing much more to try and protect the interests of their borrowers.

Well, I think ever since the Global Financial Crisis, to be fair, all the rules around lending changed quite dramatically, and then with the implementation of the Triple CFA, they changed again. So the rules around a definitely starting to relax. So getting lending is starting to get a little bit easier,

So, by the way, just so if you have I mean, because sometimes people digest their news infrequently. So the cash rate has been reduced by fifty basis points to four point seventy five percent. A question for you, and Debby's going to give her view on what she understands it maybe needs to happen, or what the banks also are anticipating because they spend a lot of time thinking about the stuff and trying to guess what Adriana was going to do. But the question for you is on I

I reckon? So I reckon it absolutely needs to come down further, and I think it needs to come down hard and fast. So a lot of economists are expecting at least a point five reduction in November. Whoa, I know, but that's and that's what the financial markets are factoring in as well. So at least a point five?

Why why should it be another point five?

And what what the economy's tanking?

And what will that? How do? What are the economic gears that get pulled when you drop the interest rate? How does that play out? From your perspective?

It gives people hope you know, is that just.

All because the cost of investing in building and infrastructure and everything, it just gets cheaper, and it means that we can see more action and that feeds through the rest of the economy and business and borrow cheaper and all that.

That's part of it. But I think probably, and I could be wrong here. This is just my personal opinion, but I think the reason that the ocr needs to come down is to give mortgage owners, like people who've got mortgages on their homes, give them some interest rate relief, because then they're going to have more money to spend in the economy. Because it's the businesses that haven't been doing sales that have been struggling, like you know, think restaurants,

Because for somebody who's got a chunkyish sort of mortgage, I don't know what the average mortgage borrowing would be these days. But if you think of people in the first ten years that they're borrowing, they could have you know, I don't know, five hundred to a million dollars on mortgage much money.

Don't remember the average mortgage around I saw something just a couple of days ago, about half of mate. It's about four hundred and eighty thousand I think is the average mortgage for a first home buyer.

Because one percent on a half million dollar mortgage, that's what's that year. Hundred bucks a week about that.

So most people in New Zealand at the moment when they're refixing their mortgages, they're either floating or just fixing for six months. So that means and that's quite different to the long term normal, like the long term Norman New Zealand is twelve month fixed rates or two year fixed rates. So that's changed. People are moving towards the shorter term interest rates now because they know that interest

Well, does anyone think that they're I mean, all the banks are trying to do with their longer term borrowing is make it so attractive that people sign up for maybe two or three or four years.

The cheapest rates are the four and five year rates at the moment.

Which tells you where they think the interest rates are going, which is down.

Yeah, exactly, because they want you to fix for long term so you don't refinance to another bank. What's in my.

Opinion, actually, I guess that must be the only motivation, because, yeah, why would they offer cheaper money. It's because they want they want your business for longer.

Yeah, and there's some banks that are offering cash backs if you refinance to them, you know, so they're trying to they're trying to get your money. They're trying to get your business. So if they've locked you into a longer term interest rate, you're less likely to refinance to another bank because you have to pay break these And my.

Producer Tire has told me that the average first home buyer mortgage it's sort of thinking of people at first home buyers, is five hundred and fifty four thousand dollars off. What did you think it was?

I thought it was about four eighty.

Yeah, I think that's a pretty good guess. It was in the vicinity of half a million.

I've read a lot of articles this week and I'm bit sleep deprived.

The age you've been working hard that we want to know. The average owner occupied mortgage is three hundred and nine thousand dollars. So that's on average, which means there'll be people who are a lot more than that. I mean, there'll be people who have had comfortably not comfortably. But if you're buying in a market like Auckland, and you've got a reasonable disposable income where you want the house you want, you might have a million dollar mortgage plus easily.

She would think there's definitely people out there with that sort of mortgage on their home. Whether that's a smart decision or not is a different story.

Yes, I know someone who works on the show who's is probably wincing at those words.

Actually, well, it depends on your financial position.

Well, because just to paint, but to paint a picture of it. What my memories deserted me on this. But what were people borrowing at at its cheapest? Were there something like two point nine to nine percent mortgages going for a while?

Yeah, so that was during COVID you know, during COVID, the Reserve Bank slashed the OCR and at that point, interest rates were two and a half three percent, you know, two and a half to two point nine to nine percent. So a lot of people fixed their mortgages for five years on those cheap interest rates.

Very good move, absolutely.

And you know, some of them still haven't come off those low interest rates. Most of them will have come off those low interest rates before the next you know, before the end of the next twelve months, but you know, that's going to have quite an impact. I think the important thing to remember is that the average long term interest rate in New Zealand, excluding the period during COVID when things were unusually low, the long term average interest rates six point three five percent.

So that also begs the question what is the sort of optimum interest rate that we should expect or I mean, because there's one thing to say, I want interest rates to be four percent or something, but it's not really going to happen realistically.

It's not likely to get that. Like, I mean, interest rates have been trending lower over the last decade or so, so they have definitely been showing a downward trend. Why is that just because I think central banks around the world have been learning. You know, we haven't always had a reserve bank in New Zealand that's controlled things with the OCR in the eighties, did you didn't have twenty

Yeah, okay, we want your calls. One hundred and eighty ten eighties. The cash rate has been dropped by zero point five percent forty basis points, as they like to say, doesn't need to fall further. And if you want a little a little bit more context, the interest rates being offered by banks, the variables are around just under eight percent, and if you want to go six months or a year, it's around sort of six and a half ish percent,

News Talk said, b's never seems good.

And welcome back to the one riffradio show on the weekend Collective. I'm Ton Beverage. My guest is Debbie Roberts. She's a financial advisor at Property Apprentice. DEBI if people want to get in touch with Property Apprentice, it is Property Apprentice dot co dot NZ. Correct with this relief. Now, by the way, I have said some text people telling me that my figures are on what the interest rates are. Look, I'm scanning a page of about probably about it one hundred,

Yep, there's some pretty good deals out there at the moment for sure.

So, yeah, what do you think should happen with the OCI should it continue to fall? And we'll talk to Debbi in just a moment about what she knows the ban Thanks are planning on, because they'll be thinking ahead on this one for sure. Aaron High, Hey, they have a going good Hey.

Yeah, I've got a mortgage bought two years two and a half years ago now, and that was kind of when the industrates are kind of starting to kind of get up and say a little bit of those Midt late fives, hot mid six, this kind of thing, And

Yeah, absolutely thinks of.

His rate changes and things like that too.

Really good strategy. And you know, I think I've read an article recently that said that most New Zealanders don't know that mortgage advisors are free to work with because they get paid by the banks. So like, we've always recommended that people work with a mortgage advisor because they essentially work for you even though they get paid by

Feet Lane, did you get yours through mortgage advisor?

Did you say, Aaron, Well, I had a friend of mine who's a mortgage broker. Yes, but I've kind of I already have. I had a house about fifteen years ago, originally as my first house when I was about eighteen, and I remember interest from its back then we're about eight to eight seven eight. But I think people when interest rates were really low, people are like, oh, yeah,

I'm glad you mentioned the more that we've talked about the mortgage broker, because we used one when we first. Because I work on a property show and I meet a lot of people, somebody produced me. But I actually wasn't going to initially because I was I don't know, I just had this wasn't it in bills and built prejudice? But I thought, what do I need to go to

All banks are different, you know, because it depends on your individual situation, and you know, some banks are friendlier than others if you're self employed, or if you earn bonuses or commissions, and you know, there's so many different variables. So if you go directly to a bank, they're only

Yeah, that was really handy with my broker. Was like for me coming back into the property after about fifteen years, I was as a first time buyer, so there was the kind of work ins and outs of using kvsaver. I couldn't use part of my kisaver, and they knew banks that would potentially help with with the with the income and all that kind of was that what do you what.

Do you think is going to happen? What do you think is going to happen with the cash? Right? Do you do you need it to for further for yourself or do you want it to fall further? And do you expect it to fall further?

Yes.

So, because I had my split rates, I had one for one year and one for two years. So my first year came off at the start of this year was February, and I fixed. I ended up fixing that for five years at five point nine percent, and so my second part, my second half, comes off in February next year. So I'm kind of hoping that dropped quite a bit, so that my other half will get them a slow rate.

Actually, that's I think that's probably going to be quite good timing if that's coming off in February, because I mean, the financial markets are certainly factoring in big drops between now and then.

So yeah, good, thanks for call Aaron. Good on your mate. Yes, okay, bye bye. Actually, how many ways can you put your mortgage realistically? Because there would be people who for sure have In fact, I would imagine that most people would have a revolving aspect to their mortgage.

Oh you might be surprised, I'd say most people don't.

Isn't that funny because I just assumed that that you'd have a revolving one that you would put everything into to try and reduce whatever you had on that or some aspects, even if it's ten twenty thirty thousand, so it's like your living expenses. But if you can be frugal, you can pay that off.

Yeah, revolving credits and offset that wants are a great way to pay your mortgage off faster. But you've got to be pretty good with your money management. Not everyone is, So if someone's not very good with budgeting, it'd be a nightmare. Okay, And Also, it does affect how much you can borrow because the offset loan and the involving credit they're on a floating interest rate, so banks test it differently, So it does affect how much you can borrow.

Not just yet, how many ways can you how many ways can you split the morghage? Could you go for I want a third on five years, I want another third on three years, and I want another third on you know, one year. Can you do that and split it as as you want?

As far as I'm aware, there's not a restriction at all as to how many different splits you have, it's just how many you want to be managing.

So okay, I've just realized that I probably should have split mine a bit more because I just you know, when you get used, this is the thing people will be listening. You think. I'm sortied. This is what I've got. I've got a little bit on revolving, but we've paid off the revolving. We've just got what we've left on a sex month because I think that's going to keep falling.

I know.

This is where having a crystal ball would be really handy, wouldn't it.

That would be great if I had a dollar for.

Every time someone said to me, what do you think is going to happen about this?

You know, how do you advise people on that? Because you are a financial advisor as well, and obviously you don't give advice to people over the airwaves. It's just general comments. But what do you say when people say what do you think is going to happen? Because you're allowed to say what you think?

Yeah, absolutely, And I mean part of that is my job. You know, I've got to give advice based on what we know about what's happening at the moment and best guesses as to what's going to happen moving forward. But you know, this is part of what we do where we live and breed this stuff every day.

So well, speaking of those who live and breed the stuff, are the banks what are they signaling that they think the cash rate's going to do in the next little while so.

They're definitely signaling that they think rates are going to come down. A lot of the banks drop the interest rates before the announcement.

Well that was one of the things that's like people were holding out for the OCR change. And some of the comment Trail'd had through guests in the studio is like, well, the banks have already priced that in, although it does seem that they've moved a little bit, doesn't it.

So the thing, I think it's going to be interesting over the next few months because banks do compete with each other and when they see one bank reducing rates, they're like, oh, maybe we should start reducing because they don't want to be the one that's high higher than everyone else. You know, because people shop around, and especially if they're working with a mortgage advisor, the mortgage advisor knows which banks are offering the best deals at the moment.

So yeah, so what of the So how do the banks signal it that you what what do you think they're going to go down to?

What do you think that I would say just about all of the banks are expecting next month's announcement to be another point five reduction in the OCR at least boomfa. Some of them are expecting point seventy five.

Really, I know, wow, I know, how.

Cool would that be? Every wrong with the mortgage right now has got their fingers crossed.

I mean, everyone has their reckons. You know why I don't think they'll do that is because I think that Adrian or in the back of his mind and his team are still worried about giving inflation a bit more of a nudge, even though we've got it and we're getting it out of control, that they will be nervous about giving too much stimulus because that would be at one point two five percent, which is a lot more money coming back into the economy potentially.

So it's all going to depend on the figures that come in because we've got what is it is GDP's out next week. I think at the top of my head, I think it's next week, next Wednesday.

Okay, Tyra will look at that. We'll get a date for next on GDP figures when they next out.

Tyra, I literally just talked about that in the event that I just ran at work. I can't remember now, that's all right, brain's shutting down.

So we're talking the consensus ism. It sounds like a minimum of point five almost.

It seems that that's the way that the market must be things. Yeah. Yeah, So because the OCR announcements every six weeks except for over Christmas, so next month is the last one until February. You know, we don't have another OCR announcement until February. After next month, so yeah, And I think when the GDP results come out, if that's showing that the economies in worse shape than they think it might be, then that increases the chance that things could drop further.

Okay, fast the date I've got here. Last one was nineteenth of December for GDP figures. The next one's September. The next one's nineteenth of December.

So what's the one that's out next.

We'll check it, We'll check.

Let's keep it.

We haven't got to break it coming up, No, put that phone away, a Multiti if she thinks the Reserve Bank leader knows what he's doing under grant, especially that's from Duncan looks if it was Ashley Church, I know it did say he criticized the hell out of him.

But yeah, I mean I think, and I mean it's easy to judge from this side, isn't it I've not been in his shoes. Hindsight, Yeah, benefit of hindsight. I mean, no one, no one has lived through a global pandemic before, so none of the central bank leaders around the world had lived through a global pandemic before. So I think it is challenging times. In hindsight we can say, I think he took too long to increase them, And in hindsight we can say, I think he took too long

Yeah, well, yeah, you're right. It is difficult because you just can't put yourself on what we were really saying before he took action.

And to be fair, he's not making these decisions on his own, you know, so no one can just blame him for everything, and that we might like to.

I think Debbie wants to Tim, what about that, Well, this is just a question on income for retirees, But what about the poor retiree with money and the MAC relying and topping up his pension with interest from investment.

Rates exactly when interest rates and savings accounts go down, and that does affect people that are living off their interest on their savings. So you know, they've been doing pretty well with the higher interest rates. There's always a flip side, is that text?

And it's right in a way though. If there is high interest rates, it means that also it's high inflation, so you might be getting more for your buck, but you're als having to spend more. So what if the interest rates for that means inflations come down. Does that mean it's not as dramatic as that text sounds or I.

Don't no, I think it's I think it's tough. It's tough for retirees that are relying on savings. So you know, this is where key we save is a good idea because you know, and managed funds as well. Managed funds do tend to give a stronger return over the long term than savings accounts. Fixed term deposits at the moment are still pretty good, so you know, if you're looking at getting higher interest rates for the next five years, for example, long term fixed deposits, news for you By.

The way, the announcement you're thinking about, which is sixteenth of October, which is Wednesday, is the inflation announced fact.

I knew it was one of them. I knew it was one of them. I literally just talked about it.

Right, We're going to take a break. You can give us your calls. Where are you happy with the reduction and the interest rate and how much further should it fall? With YOCA. We're also going to touch on just this bit of news that one person households have increased by one hundred and twenty thousand over the past decade, but only thirty percent of new builds are one or two bedrooms, and begs the question about what sort of property makes the best investment. We'll be having a chat with Debi

Helping you to get on top of your busy life. Tim Beveridge on the Weekend Collector News Talk SETB.

And my guest is from the property Apprentice, Debbie Roberts. Debbie, let's just quickly talk about the top sort of houses that are not being built or the increasing number of people just in one person residences. I mean, is there if you're an investor, I must admit I just sort of think without being an investor, I want definitely three bedrooms minimum. Is that why we're not really building a lot of one on two bedrooms or is there a space for movement there?

I think there's definitely space for movement. With the changing demographics, you know, we are seeing more people living alone or just one or two people, and you know, one bedroom properties is more than enough for a lot of people, and it's certainly one way with developers building one and two bedroom properties. It's a way that we're going to see prices, you know, getting reasonable for first time buyers. Like first time buyers don't necessarily need a three bedroom house or want one.

Of course, you're not going to get a house, are you. You're going to be getting a uni or own apartment?

Well potentially, I.

Mean who would. I mean, you wouldn't have a piece of land where you've got a house and you just go, no, let's just make it the one bedroom. Thanks, make it a big one. But it's just one.

Exactly, I mean. And this is one of the reasons that the government's looking at introducing the granny flat, you know, the proposal where you can add an extra dwelling.

The sixty square meter thing, yeah, exactly, that's a monster.

Square meters is a decent size. The first property we purchased was an eighty square meter two bedroom house and we thought it was great. It was on four hundred square meters of land.

What are the old workers cottages that Ponsibly used to be before it became the trendy place. They still are sort of that size, but they've just been spruced up a bit.

Yeah, I don't know. I think it's good that the developers are starting to make you know, one in bedroom, one and two bedroom properties because it does give people a bit more choice. You know, not everyone wants to have borders or flatmates or to.

Pay off the rent. Of course, you've just made a case for actually having a larger property because so well, now for that extra bedroom out.

And potentially, yeah, but not everyone wants to do that. So and when it comes to buying investment properties, you need to think about what tenants in the area look for because so some areas there's no demand for one and two bedroom properties because they're multi generational families. They want to you know, they want five or six bedroom houses to rent all properties with a sleepout that you know that adult kids can live in. So it depends

Because an vice, because I mean, they're still not building a lot of one or two bedroom places, are they, I mean, unless, of course it's retirement villages, which probably specialize in one or two bedrooms.

Yeah, there's lots of townhouses that were built in the last couple of years that were one and two bedrooms. So yeah, and in some areas there's an oversupply of those in the rental market now. So you know you do it because a lot of them all came to the market at the same time. They all came at completion at the same time time everyone's looking for tenants for one and two bedroom property. So you do have to actually do some homework before you purchase an investment property.

That actually is quite a good question we could probably explore another time as to how much how long it takes you to do your homework on because I mean, homeworker is a never ending, never any journey, really when it comes to understanding what the property market is. But if you were looking for an investment property, how much home would you need to do? It's that's probably what's why I've never done it. It just feels endless.

It's probably the toughest decision that a new investor has to make, and that's where having some help along that journey can make things a little bit easier, you know. I mean, we've got access to a whole bunch of information that helps people make decisions and based on their financial position and how much they can borrow. There's so many different things that come into it.

So, by the way, that when where were in the document that we put together for the show, and we've just got the summary of things around the number of households one hundred and twenty thousand, one person households over the past decade, and it says, but only thirty percent

If you look around Auckland and look around christ Church, there's a whole bunch of one and two bedroom properties being built.

So would you invest in a one or two bedroom property.

If there was demand from tenants? There? Absolutely?

And how would you work out a first demand from tenants there?

Took to a good property manager in the area. They know what people are looking for.

I think we might have to save that question about how much homework you need to do because a lot of people who listen to a show like this, you know, there'll be people who've got an active interest in investment, but there are people probably like me you who have

So I mean there is quite a few things that you need to check out to make sure that you're not buying a lemon. So like a building inspection. You know, once you've got a property under contract, you've got to do a building inspection in my opinion, even if it's a new build, get drug tests done if you're going to rent it out.

Well, that's just a checklist on practicality, forgetting the money, forgetting the actual whole investment equation and prediction.

I mean investing in properties, not rocket science. This is the thing, but it's like most people don't know how to do it because they've never done it before.

And that's where a property apprentice comes in, of course. Yeah. Actually, just few texts before we head to the break High to Mike Blackburn, hair, I write, I think it might be wrote, I write the Canterbory construction report. Here in christ Churche, approximately seventy percent of all new dwellings consented are smaller multi units with an average floor size of eighty six square meters. Okay, that's good. I wonder what amongst those smaller units. I keep on thinking it's just

You know, a lot of the new builds have been targeting property investors because you know, with the previous government, obviously new builds had tax benefits for property investors if they were new build versus existing. So that's all changed now. You know, those tax benefits for new build over existing is disappearing quickly. So yeah, these I think things are going to get a lot more stable in the investment market, but certainly some areas have gotten over supply for rental properties.

Right, We're gonna take a quick break, come back and just to take the one roof property of the week. As next it's ten minutes to five news talks. He'd be.

A honey bug.

Maybe under you take nowhere and welcome back to the Weekend Collective. I'm Tim Beverage. My guest is DeBie Roberts from Property Prentice. That is Property Apprentice dot co dot Nz. Right now it is just gone seven minutes to five.

The one roof property of the week on the Weekend Collective.

Yes, the one roof property of the week is They're always gorgeous, so I'm not gonna repeat myself. It is so go and have a look for this on the one Roof website One roof dot co dot Nz. It's thirty three c Titty Mowana Terrace on a Keywa in Marlborough. The asking price is, I mean, it's a lot of money, but it's not a lot of money for Auckland people. Nine hundred and thirty thousand dollars. Although it's one bedroom, one bedroom, one bathroom, two car covered shed. Actually it's

And it's on thirty two point four two hectares, so you know, if you don't want to live in the tiny little house that's there at the moment, build something.

Yeah, it is gorgeous look and obviously the photography is done on a beautiful day. But down to them and the sounds, you just can't beat it. They do have looks like a bath that might be heated up heat, might be heated up by fire, one of those things that looks good in a brochure. But I'm not sure I every want to go to the chore of lighting it and boiling myself alive.

It looks pretty secluded that bath, though, yes.

It does well. It's just as well because generally when one is in the bath, one is nudies generally.

Yes.

Anyway, Hey, hey did it ever? Quick text? Somebody's just asking why they still stress testing at nine percent? Any comments on that?

Oh, so stress tests are definitely coming down. So most of the banks are now stress testing between eight and eight and a half percent now, so yeah, it's definitely getting easier. But you know, a couple of weeks ago it was eight point five to eight point seventy five stress tests. So yeah, it's definitely definitely coming down.

And just once again, by the way, if you if you want to check out that property of one with probably the week I'm still grazing through the photos of a little bit thirty three C two Mowana terracet Anakiwa, Marlborough and Debbie. Nice to see you. Good to know you're working hard and keeping yourself busy.

Keeping out of trouble.

Yep, we'll catch you again. Okay. If you've missed any of the previous hour discussion about the ocr and smaller dwellings, go and check out the podcast. Look for the Weekend Collective on iHeartRadio. We'll be back very shortly. The Parents Squad Catherine Burkitt's with us and how far you know the term is starting tomorrow. Kids are going to be into the study pretty soon. Do you need to ride them and nag them to get there, do their homework and their study? You just leave them to make their

He'd be.

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