Refix rates are trending down and headlines are describing inflation as “easing”, so why is Kiwibank staging a public meltdown? Its latest piece, Inflation creeps above 3%, and it’s the dirty details that creep us out the most, digs into the parts of the inflation story that still look uncomfortable for households and investors.
The bank’s message is clear: sure, the top line looks great but things are still looking pretty ugly under the hood. And the big takeaway for investors is not “job done”. It is “pay attention”.
1. We are still taking the same risk twice
Kiwibank acknowledges that inflation is heading in the right direction and that interest rate cuts are on the horizon, but it is clear that the fight is not over. For investors, the problem is that two major parts of your world still depend on the same moving piece: the interest rate cycle.
You are exposed through your mortgage, whether you are floating, fixing for a short period, or about to refix. You are exposed again through a housing market that moves largely because of changes to interest rates and borrowing power. Even if your rate comes down over the next year, most of your risk remains concentrated in one place, the Official Cash Rate and how the Reserve Bank responds to stubborn inflation.
Action you can take now:
- Open your last bank statement and work out how much cash you have left after paying the mortgage, rates, insurance and a 5% maintenance allowance. If it is less than $250 per month per property, treat that property as “high risk” and put it on your watchlist.
- Take one property and run a quick refix scenario at 1 to 1.5 percent above your current rate, with rent staying flat for the next 12 months. If the numbers go negative, decide now what you will do (lawful rent increase, cost cuts, or reshaping your portfolio) instead of waiting for the refix letter to arrive.
2. Expect a two speed housing market, not a boom
Kiwibank leans towards a story of modest recovery in house prices, not a repeat of the explosive growth we saw in 2020 and 2021. At the same time, weak population growth against the backdrop of a still fragile economy cannot be ignored.
We are in a two speed market. Properties in strong locations, with good amenities and solid tenant demand, are more likely to move in line with any recovery. Stock on the fringe, in oversupplied pockets, or with obvious compromises may barely keep up with inflation, even if the headline index shows a small gain. An index rise of 3 percent can still feel like “going sideways” once you factor in higher costs and the ongoing squeeze on household budgets.
Action you can take now:
- Take 10 minutes to grade each property A, B, or C. A = always easy to rent, great location, strong long‑term appeal. B = decent but not special. C = constant vacancies, weak location, or ongoing issues.
- Commit to spending your next dollar of capital (repairs, upgrades, debt reduction) only on A and B properties for the next 12 months.
- For any C grade property, write down one clear decision: fix, hold with a strict watch, or sell when conditions allow. If you cannot justify “fix” or “hold” on paper, that tells you something.
One West Auckland member recently realised that two of his properties would go cash negative with just a 0.75% rate rise. So here is what he did: brought forward a rent review, deferred a non‑essential renovation and is now actively looking to recycle out of his weakest asset instead of waiting for the market to decide for him.
3. Monetary support without a free lunch
The bank’s broader commentary paints a picture of cautious optimism. It sees better days ahead as growth gradually improves and the worst of the downturn passes, but it is also clear that government finances are under pressure and deficits are deeper. Monetary policy may provide some support as rates ease, yet there is less room for big, expensive fiscal rescue packages.
The margin for error is getting razor thin. Investors cannot assume that policy changes or fresh stimulus will ride to the rescue if things stay tough for longer than expected. “I know Jarrod Kerr enough to know that if he is ‘creeped out’, the rest of us should sit up and pay attention,” says APIA general manager, Sarina Gibbon. “If you are banking on this supposedly ‘recovery’ and nothing else then it is time to go back to the drawing board. The investors who will come out ahead are the ones who know their numbers back to front, plan for ugly scenarios and make boring but disciplined decisions month after month, spreadsheet after spreadsheet.”
Action you can take now:
- Set up a simple spreadsheet with one row per property and columns for mortgage payment, rates, insurance, average maintenance, and an allowance for vacancy. Update it once a month using your bank statements.
- Check your fixed rates and list the expiry date for each loan. If more than half of your debt resets in the same three‑month window, talk to your adviser or banker about spreading that risk across different terms.
- Calculate what three to six months of expenses looks like for each property and set a target date to build that buffer (for example, $6,000 by June for a typical Auckland house). Even small, regular top‑ups to a separate “buffer” account will get you closer.
Kiwibank is not telling investors to panic. It is reminding us that the real story sits in the details, and that this is a phase of the cycle where discipline and realism will matter more than optimism and slogans.
If Kiwibank’s article bums you out somewhat, you are not alone. The good news is you can do something about it. At our upcoming investor meeting, The Great Reset, you will walk away with a simple stress‑testing template, real examples of deals that still stack up in this environment, and honest stories from investors who have already made the hard calls. Register now to avoid disappointment.
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