EDITORIAL

Calm before the storm

It seems while everyone is busy, busy, busy, it is quite quiet in the mortgage-advice space at the moment. But maybe this is the calm before the storm.

After years of low interest rates and rising house prices, the picture has changed quickly.

With that change comes a shift in the way mortgage advisers’ businesses operate.

Instead of getting deals across the line, many advisers are going to be shifting to a phase of helping clients navigate the changing market environment.

A graph I saw recently, of forecast OCR (Official Cash Rate) increases, graphically illustrated how quickly and sharply interest rates will rise.

Predictions are that the OCR will double from its current level to 3% by November this year. Arguably that means current home loan rates will double.

Some of this pain may not be instantaneous. For instance, a first home buyer who paid top dollars for a property a year ago and is sitting on a two-year fixed rate is not going to experience difficulty until next year.

It is in these times that the true worth of good advice will be tested.

Added to the emerging list of problems are the active investors who were buying and selling properties, and who are now facing difficulties when to comes to financing deals.

In the last major downturn, we saw many of these people get into serious trouble.

The market goes in cycles - and the ugly part of the cycle is likely to emerge soon.

Likewise, there are early signs that developers are starting to struggle to sell properties off the plan.

We have seen this before, too.

The fact that there’s been a housing shortage in New Zealand for many years has been indisputable, but it may not be long until we have an oversupply.

That, added to all these other factors, is going to change the lending industry significantly.

It’s something that mortgage advisers should be thinking about now and what impact it will have on their business model.

Home equity release

In this issue of TMM, we look into the growing home equity release (HER) market. Many years ago, before the Global Financial Crisis, we had a number of players in this market, including Bluestone.

Heartland, formerly Sentinel, is the only one of that crop which remains. It has seen significant growth with reverse mortgages. Now, there is another new player about to enter the market.

Home equity release is not something advisers are likely to be getting enquiries about every day, but it is a growth area and one all advisers should skill up on. In this issue’s lead story, Eric Frykberg provides an update on the market.

Also in this issue, we start a new column from Koura Wealth to help advisers with KiwiSaver. Like HER, this is a product mortgage advisers should be familiar with.

With all the changes happening in the market, mortgage advisers need to think about other services they can add to their businesses - to help them grow and prosper.

Philip Macalister Publisher

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