Waikato mortgagee sales hit 7-year low

Forced house sales in the Waikato have hit a seven-year low as a strong Auckland economy fuels the region.

CoreLogic, a property information service, released figures which showed residential mortgagee sales in the Waikato have dropped considerably since 2009, as lowering interest rates and a buoyant housing market continue to gather strength.

The decrease comes ahead of predictions the official cash rate (OCR) will be cut further on Thursday, which is likely to be followed by another flurry of cuts to already record-low rates.

Depending on which rate you take, the repayments on a $500,000 mortgage can be from $3122 at the cheapest rate in the market of 4.35 per cent fixed for one year, to $3727, if you stay floating at the most expensive main bank rate of 6.5 per cent.

But senior economist Christina Leung said it was too early to say whether foreclosure sales would remain low as the year progressed.

Leung, of the New Zealand Institute of Economic Research, said lowering interest rates improved the ability for households to service debt but a possibility of a ‘‘headwind’’ from the dairy downturn remained.

‘‘But having said that, we have seen signs that strength from the Auckland economy is flowing through to that region as well. Overall, the outlook is still fairly positive for the Waikato region.’’

The latest figures showed mortgagee sales were down 58 per cent compared to the first two quarters of 2014.

Leung said the positive vibe from the Auckland economy had also reached neighbouring Bay of Plenty.

However she warned of a ‘‘decline in confidence’’ as lower dairy incomes meant less spending in dairy services.

‘‘At the moment, it’s more a confidence thing than actually activity declining. If confidence

was to continue to deteriorate then you would expect that households and business would start to rein in spending.’’

A softening of the market did not always translate into an increase of mortgagee sales, she said, but it was possible.

‘‘It might be the case that if there was a downturn in the labour market, then it would be a lot harder for people to be servicing their mortgages and hence the forced sales we see with the mortgagee sales.’’

Employment growth was slowing, but businesses were generally looking to hire’’, she said.

Mortgage adviser Di Dunn said there were many options for buyers, with low interest rates creating more affordability for borrowers.

Dunn said Hamilton’s housing market could be preventing people going to mortgagee sales if they were selling their homes before they reached a critical stage.

‘‘The housing market probably allows you to achieve a good sale on your house before it is sold by the bank.’’

Banks had tightened their criteria after the Global Financial Crisis of 2007 and 2008, and looked to future proof mortgages, she said.

‘‘I think probably a big driver of lower mortgagee sales is that the banks have a much more robust affordability criteria.

‘‘Their servicing or affordability criteria is a lot harder and makes sure that in the rising rate market people are still able to service their mortgages’’.

Banks took future proofing a lot more seriously, she said, as a result.