Mike Hosking: Forecasters don't understand our housing market is based on heart

 

Here they come – the warnings.

First cab off the rank is ASB. It is home loan interest rate “slap you in the face with new reality” time.

They say a one percent increase in your mortgage rate sucks $3 billion out of the economy and into mortgage repayments.

This is of course why the Reserve Bank has been so nervous.

You see, your story is not everyone’s story, and it’s the culmination of everyone’s story they worry about.

If it’s two percent, then people start to spend vast swathes of their income on – i.e. 50 percent – on repayments.

But here is the good news. The ASB say most people will be fine, which brings us back to what we have said all along:

People aren’t idiots, and banks aren’t in the business of, one, lending to people who can’t afford it, and two, sending customers broke, hence all the noise from Adrian and his capital based worry warts has yet again been in vein.

What none of the international forecasters, the latest of which have been Standard and Poors, have ever really understood is that our housing market isn’t based on norms or charts or graphs or arrows or numbers, it’s based on heart.

We have, rightly or wrongly, an overtly passionate relationship with the idea of our own home, of owning our own place, it’s a rite of passage.

That’s why it’s become so political. When more and more got locked out, the anger grew along with the expectation that someone, i.e. the government, would do something about it.

These have been the best of days for borrowing. You would hope we never see them again. The carnage caused this past year has been unparalleled. The debt our nation is running up is shocking and we’ll be paying it off for generations. We will run deficits for years.

And the interest rate rises, which are getting forecast to arrive at an ever faster pace, will affect the country as well as us personally.

That’s a good thing. This mad ‘print the money, throw cash at everything that moves’ might have helped cushion reality, but the scars are decades deep.

But unlike so many forecasts of the last year that have been based on nothing but guess work and mostly been wildly wrong, I think the fact that interest rates may rise and a tightening of the market will occur, the suggestion from the bank that we will be fine is, in fact, spot on.

Because that’s the way it’s always been. Through good times and bad, we want a house, we love a house, and the world and its worries isn’t getting in the way of that.

Mike Hosking is a New Zealand television and radio broadcaster. He currently hosts The Mike Hosking Breakfast show on NewstalkZB on weekday mornings.