I’m gonna sit right down and get myself a mortgage…

How much sense is there in making borrowing money to buy a house easier when there's a housing shortage and house prices are at record highs?

First, you have to understand that I know nothing about economics. I am totally unqualified to discuss anything to do with finance. I leave that all to the brains in the organisation, one JC, to whom I have the good fortune to be married.

So you’re well within your rights, indeed you might even be well-advised, not to continue reading. Then again, you might adhere to the old precept that where ignorance is bliss ’tis folly to be wise and lend at least half an ear to what this Irish ignoramus has to say.

So (it’s imperative these days to begin every sentence with “so”!), I hear that the Governor of the Reserve Bank has cut the Official Cash Rate by 0.25% to 2.25%.

Borrowing money has just become cheaper. This is good news for people who want to borrow money, particularly people who want to buy a house but haven’t got remotely enough money to pay for the house. I’m happy for them, of course.

Debt has just become cheaper and more attractive. We won’t worry too much that this debt is going to take years, possibly decades to repay. Nor will we depress those happy borrowers with the reality, gained from personal experience, that that cheap mortgage will be an albatross around your neck for all those years or decades, and that the happiest day of your life will be the day you get rid of the bloody thing.

No, let joy be unconfined, the doors to the property market have just been opened a little bit wider.

Now, far be it from me to question the wisdom of such an eminent figure as the Governor of the Reserve Bank. But I thought there was something of a housing shortage these days, “a crisis,” some alarmists have called it. And I was pretty sure that house prices, particularly in the metropolitan areas, and super-particularly in Auckland, had skyrocketed well beyond the reach of the average and indeed the above-average buyer. So how much sense is there in making borrowing money to buy a house easier when there’s a housing shortage and when house prices are at record highs?

“Buying” is of course not strictly the right word. You haven’t “bought” a house when you take out a mortgage. You’ve bought a minority share in the house. Your bank owns the rest. And will do for years to come. And in those years to come… well, who knows what might happen? To paraphrase an old saw: what goes down will inevitably go up again, and for reasons that are entirely beyond your or my control. So you might at least consider giving a second thought to putting your money on term deposit and renting.

You won’t, of course, and for two reasons.

The first is that the interest you’ll get on your term deposit is, in no small part thanks to various Governors of the Reserve Bank, bloody pathetic.

And second, you’re a Kiwi and you’ve been raised in a property owning democracy where social legitimacy pretty well depends on owning a house and where renting is seen as somewhat, shall we say, déclassé. As my old friend Austin Mitchell so neatly put it: welcome to the “half-gallon quarter-acre pavlova paradise”.

Still, it could be worse. In a previous life Judy and I built a sleep-out to house our joint progeny, or some of them. We borrowed the cash from our insurance company – a steal at 20% per annum.

You’ve never had it so good, mate! Or that’s what you think now.

Media trainer and commentator Dr Brian Edwards posts at Brian Edwards Media.

Tune into NBR Radio’s Sunday Business with Andrew Patterson on Sunday morning, for analysis and feature-length interviews.

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