Every month it seems we are writing about a new low mortgage rate. And this month is no exception!

The rates have continued to drop to unprecedented lows. Every bank has some kind of an offer on the table that is under the 4% threshold.

The big four – Westpac, BNZ, ASB, and ANZ – are all offering a rate of 3.85% for 2 years or 3.85% even for 3 years. Kiwibank and TSB also have interest rates under the 4% mark too.

Basically, there has never been a better time to review your mortgage. If you haven’t looked at your rates in a while, then you could be making some big savings by simply tweaking the structure or interest rates. If you are interested in knowing what your position could look like, then give us a call here at Mortgage Suite today.

Will The OCR Move Again?

No one has a crystal ball to predict the exact future, though it would be nice! However, by watching the trends around the world, reviewing history and trusting their experience, economists can make a pretty clear prediction on what might happen.

So, will the OCR drop even further?

The economy and housing market are only just starting to see the results of the last rate cut. So, it is not 100% certain whether that action alone will have the desired result on the economy that the Reserve Bank was looking for.

However, in a recent survey of economists by The New Zealand Mortgage Mag, 85% of those surveyed believe that the “central bank’s Monetary Policy will opt to keep the OCR at its current record low.”

They are also predicting further cuts to the OCR, potentially in August and November of this year because of the global position. “Amid escalating trade tensions between the US and China, and falling GDP in major economies, leading economists say the bank could point to increased risks to the domestic economy.” [source]

We can only watch and wait to see what will happen, and what it will mean for the economy and interest rates.

First Home Buyers Building Market Share

While there is still a lot of commentary on housing prices being too high, it doesn’t appear to be stopping first home buyers. They are steadily building their market share. “First home buyers continued their strong streak in April borrowing $964 million, compared to $868 million in April last year.” [source]

This could largely be a result of increased use of the bank of mum and dad! In fact, “the bank of mum and dad lent an estimated $71 million last year, according to a presentation from New Zealand Trustee Services at last year’s Financial Advice New Zealand conference.” [source]

Westpac recently conducted a survey that shows “the older generation are willing to act as guarantors, quasi-lenders, and gift-givers for their children. About 55% would be prepared to gift money, 21% would offer a loan with interest, and 18% would buy a property outright for their kin.” [source]

Despite the strict lending criteria of the banks, there is still an opportunity for first home buyers. Especially if they are able to get help from their parents. Get in touch with us here at Mortgage Suite if you would like to know how this kind of lending might work for you.

Where Should I Get Advice?

Canstar have also conducted an industry survey, and they discovered “only 27% of New Zealanders view their bank as a place to get good financial advice.” [source] This seems to have come in the wake of the Australian Banking debacle, as well as the investigation and sanctioning of some of the banks here in New Zealand.

So, what does that mean? Who can you trust for your financial advice?

The answer is simple, a qualified Financial Advisor like the team here at Mortgage Suite. We ensure that we provide you with the best advice for your individual situation. The great thing is, any decisions regarding your finances rest with you. That means you are always in control and can choose the option that suits you best.

Get in touch with us today for a free no-obligation chat about how we might be able to improve your financial position.

The OCR

The Official Cash Rate was reviewed last week. As I explained last month, the OCR, or Official Cash Rate, is an interest rate set by the Reserve Bank. This rate affects all other interest rates offered by the various lenders in New Zealand. It is effectively the wholesale price for borrowing or lending money in New Zealand. It is set by the Reserve Bank to ensure that there is price stability for Kiwis.

This rate is reviewed 7 times a year to ensure that it is kept up to date with the current position of the country. The OCR is currently sitting at 1.75% and is expected to stay the same in this review. The position is that the rate will remain on hold for this year and next with an expected change in 2021. At this stage, it is not known whether that change in 2021 will see it go up or down.

So, what does that mean in real terms?

It will probably mean that we are going to enjoy the low-interest rates the banks are offering for a bit longer yet!

Interest Rates

Concerning interest rates, ASB have just reduced their 3 year rate to 3.95%, I believe other banks will follow.

Some banks are even offering rates below the 4% threshold or have a price matching policy to give borrowers the best deal. There are criteria that apply to obtain those rates, but the stipulations are reasonably easy to meet. That means most people will be able to enjoy amazing rates whether you are refixing your mortgage or looking at new borrowing.

If you are considering buying, topping up your mortgage, or renovating, then now could be the time to do it with such attractive rates on the market. Just remember to always take solid financial advice to ensure it is the best decision for your budget.

Using Financial Advisors

You may remember that last month there was a huge amount of backlash in the Australian market concerning banks and mortgage advisors. That kicked off a lot of talk here in New Zealand about the relationship between financial advisors and the Australian owned banks – ASB, ANZ, BNZ, and Westpac.

Currently, mortgage brokers are able to offer their services free of charge to the consumer market as they are remunerated by the various lenders when a mortgage is secured. There was talk of introducing a commission payable by consumers to keep fees transparent.

The Big Four banks have indicated they see huge differences in the New Zealand market compared to the Australian one. They have all voiced their support of mortgage brokers here in New Zealand.

BNZ said advisers play “an important role in enhancing competition in the home loan market. We will seek opportunities to learn from the Australian experience as we look for better ways to exceed our customers’ expectations. BNZ supports mortgage broking as an option for New Zealand home buyers.” (source)

Basically, it means that you can still enjoy the same support and advice you have been receiving from your mortgage broker for free. If you don’t have a reliable mortgage broker that you can call on, then please feel free to get in touch with us at Mortgage Suite. We would be more than happy to help with any queries you might have.

The OCR

The OCR, or Official Cash Rate, is an interest rate set by the Reserve Bank. This rate affects all other interest rates offered by the various lenders in New Zealand. It is effectively the wholesale price for borrowing or lending money in New Zealand. It is set by the Reserve Bank to ensure that there is price stability for Kiwis.

This month, the Reserve Bank indicated that the OCR will remain the same at 1.75%. It is expected to remain that way for the rest of 2019 and 2020. A review is scheduled for 2021 and at this stage, it is hard to say whether it will go up or down at that point.

So, what has caused the lack of change?

It is down to the fact that New Zealand’s economy is doing well. Employment is seeing continued growth, inflation is at a low level despite the global weakening. Low interest rates and government spending are expected to see a growth in New Zealand’s GDP this year.

What does it mean for the current interest rates?

Current Interest Rates

As we mentioned last month, the current interest rates are at an all time low. In fact, the average two year fixed interest rate reduced from 4.33% to 4.25% between December and January but we are able to 2 year rates as low as 4.05%pa. This is the second lowest rate since data was first collected in 2002 (the lowest rate was 4.23% in October last year).

While the media are reporting that we are moving into a buyer’s market, there has been no evidence to suggest a significant downturn in the sale prices for houses. However, with interest rates at an all time low and good lending confidence form the banks, property is becoming more accessible for people.

So much so, that first home buyers are continuing to grow their market share and edging closer to investors in the market. In January 2019, first home buyers accounted for 17.3% of all lending, and investors 17.9%. Could the current conditions finally be making property more affordable for the average Kiwi family?

The Field Of Financial Advice

There has been a lot of negativity surrounding financial advice in the news after the Australian banking debacles and the reprimand of life insurers overcharging consumers. This has inevitably had a flow on effect to the field of financial advice with the field under intense scrutiny.

But, all of this doesn’t change the fact that a mortgage broker can really help you with your finances. A DIY approach to your mortgage is not the answer. It will mean a huge time investment and how do you know if you are really getting the best deal?

By comparison, Mortgage Suite have professional relationships with all of the major (and minor) lenders in New Zealand. That means we have access to information that the general public doesn’t. It means we can use our knowledge of the options available and our expertise to ensure you get the best deal for your particular circumstance.

If you would like to discuss anything about your financial position then we are here to help. That could be preparing to buy your first home, upgrading your current home, restructuring your mortgage, or simply refixing your interest rates. Get in touch today for honest advice you can trust.

Why Are The Rates So Low?

By the end of 2018, home mortgage rates dipped below 4%, the lowest recorded rate since the 1940s! Rates are still hovering around that 4% mark with many lenders offering even further sweetners at various times.

So, why are rates so low?

Many events have combined to bring interest down to the current level. The influx of springtime and summer house sales, the steady OCR rate, the steady demand for houses in the major centres.  The economy remains strong – with low unemployment and inflation rates.

This adds up to lending confidence. The banks are willing to lend to people who are able to comfortably service the repayments. With low-interest rates, your monthly repayments are naturally much more manageable.

What Does It All Mean For You?

With existing mortgages, it means that now is the time to make sure you are getting the best deal. No one wants to pay more interest than necessary, and your current mortgage could have you paying more than you needed..

Indeed when was the last time you reviewed the structure of your mortgage?

There are many different “products” out there in the market – from fixed and floating options, to offset accounts, and cashback deals. If you haven’t reviewed the structure of your current mortgage, then get going and do it!

You could see some significant savings, or even reduce the term of your mortgage which would be a big bonus allowing you to retire earlier if you wanted to.

If you are buying your first property then this the time for you to to get it right and the right mortgage is vital for a good start,

The banks are lending with confidence, at that means you could make significant headway on your mortgage payments while the rates are so low.

So don’t hesitate any longer. Now is the time to act and lock in all the advantages being offered.  These great conditions may not last for ever.

What Future Holds

Without a crystal ball, it is hard to predict exactly what the future might hold. Things can change in New Zealand and worldwide over the next two or three years and the results may not be so favourable they are now.  The less-than-4% rates are not expected to last for ever. All the banks offering these specials have put a definite deadline on when these special rates will continue to remain available. Maybe this may not happen for the next 2-3 and rates could remain steady but in real estate terms that is not very long.   It is highly unlikely that they will drop much further in any event.

While the rates are low, this is the time to consider buying your first home or renovations to your current home. What ever you do, it is wise to remember that whatever the interest rates are, you will still need to pay back any money you borrow. So, you want to ensure you are making sensible decisions and not stretching your finances too much.

Now is the time to review your finances and get some solid financial advice. Get in touch with us here at Mortgage Suite. We can help you to see what options are available for you and how you can best arrange your future. Drop us a line today for a free no-obligation chat.

Keep Your Christmas Spending In Check

Short term debt can kill your chances of being approved for a mortgage. One of the biggest threats at this time of year is running up large amounts on your credit card.

The cliche that it is ‘the thought that counts’ is so relevant at this time of the year. You don’t have to break the bank when buying gifts for your friends and family.

Remember that holiday spending does not have to be expensive. People do not need top of the range gadgets, gourmet foods, top shelf drinks, or business class flights to have a good time. Instead, it is about being thoughtful and creative. Choose the foods everyone loves, bring out the traditional decorations and carpool for family Christmas events.

Some of the best gifts you can give don’t cost a lot of money. Think about the person that you are buying for, what do they really like? What can you buy them that is meaningful, but within budget? Also, think about who you are buying for. Of course, you need to get gifts for the meaningful people in your life, but not for everyone you know.

 

Do Not Go Beyond Your Means

You should always try to stay within your means during the holiday season. There is a lot of opportunities to spend like crazy, but it doesn’t mean that you should take those opportunities.

The best thing to do is to set yourself a budget for your holiday spending. That means a budget that includes all of your potential outgoings – gifts, food, travel (if applicable), decorations, and general spending. Don’t simply pull numbers out of the air, really have a look at what you can afford to spend. Then, when you have the budget… stick to it!

Be realistic about your spending decisions and don’t feel pressured to spend just because everyone else is.

Keep Your Borrowing Power Up

As I mentioned above, one of the first things that a lender will look at when assessing your financial position is your short term debt.

Basically, all they are trying to work out is whether you are a good investment or not. Whether you will be able to make the loan repayments if they go ahead and lend you the money. Large sums on your credit card, personal loans, finance agreements, or lots of hire purchase arrangements will give the impression you are not good at managing your money.

Avoid putting yourself into debt this Christmas. If you can’t afford it right now then don’t buy it.

A lender will also check your spending habits. So, think very carefully about what you are buying even if you have the money available in your accounts. Lots of unnecessary spending may indicate to a lender that you will buy luxuries instead of paying back your loan.

While short term debt and big spending may not entirely prevent you from obtaining a mortgage, it can impact the amount you are able to borrow. A lender will want to ensure you can service the loan they give you. If you have a lot of other outgoings to cover then it can lower the amount they are willing to lend.

To wrap it up, my advice is to keep your holiday spending to a minimum this year. That way, you will give yourself the best chance of qualifying for a mortgage when you are ready to buy a home, invest in a second property, or even to borrow for renovations.

If you have any queries about your eligibility to borrow for a mortgage, then get in touch with me here at Mortgage Suite today.

Continue reading “Buying Or Refixing? Why Now Is The Best Time To Examine Your Mortgage”

“As a first-time home buyer, the most important thing to remember is that the only person who can understand your unique position is you. You alone have to ‘own’ your home-buying journey…even if others are propping you up with support. There are always your families, your friends and work colleagues giving you advice and the advice can even come from people who haven’t stepped into the market for decades or more. Therefore it is important that you receive qualified and knowledgeable advice from the experts.

1. Getting your finances sorted.

Facing facts:

Until you know what you can afford, it’s pointless watch-listing properties or trudging around Open Homes. You need to know your parameters and any areas of your financial record you need to address before you start on the whole home-buying journey.  This is an excellent round-up of what you need to be across.

KiwiSaver:

If you‘ve belonged to your KiwiSaver scheme for at least 3 years, you may be able to apply to withdraw all except $1,000 of your KiwiSaver savings towards buying your first home. But there are conditions: you’ve got to intend to live in the property so it can’t be used to purchase investment property.  Also worth researching is that not all complying funds allow First Home withdrawals, so you will definitely need to understand what yours allows. Sometimes, a real-life case study helps to picture your situation too, so read this.

KiwiSaver Home Start Grant:

After 3 years of regularly contributing to KiwiSaver, you may be entitled to the HomeStart Grant. It’s available on old/existing homes or new/buying off the pans/land to build situations, up to a maximum of $5,000 for an older/existing home or $10,000 for a ‘new’ home. If you are buying a property with other people, a maximum of $10,000 worth of grants will be available on an old/existing property and $20,000 for a new home/purchase of land. You can only receive this grant once and there are eligibility conditions (including income caps) to meet. It’s really important to understand that Housing New Zealand need at least four weeks/20 working days from receiving an application through to paying out the KiwiSaver HomeStart grant. If you are applying for the grant in order to meet the financial conditions of your agreement for sale and purchase, you have to do so at least 10 working days prior to the unconditional date. Find out more or apply online.

Your deposit:

Debate has been raging on the difficulty of building up a deposit ever since the Reserve Bank introduced higher LVR restrictions (loan to value ratios). In November 2017 however, the Reserve Bank of New Zealand announced a moderate easing of LVR restrictions, effective from 1 January 2018: a 5% lift in the amount of ‘less-than-20% deposit’ loans that a bank can write for owner occupiers. So, it’s worth researching your mortgage options actively across lenders before you begin. We will be able to do the research for you for the choice of the best lender suitable for you. Despite these restrictions, we are able to get you into homes with just 5% deposit (special circumstances)

The Welcome Home Loan

Offered by lenders, supported by Housing New Zealand, and, designed for first home buyers who can afford to make regular repayments on a home loan, but have trouble saving for a large deposit: a Welcome Home Loan only needs a 10% deposit. You need to meet the lender’s specific lending criteria, you may have to pay a low equity fee (depending on the lender) and regional house price caps do apply. Visit their website for more information, including case studies, lender options, and FAQs.

2. Property Research

Once you know what you can afford, it’s time to start looking. This is where the advice hotline really starts to hum because a property is our national obsession.  Residential real estate accounts for a whopping $1.07 trillion (with $248 billion in home loans) of our national asset class. By comparison, NZ listed stocks are $130 billion and KiwiSaver/Superannuation area measly $79 billion.

When everyone has a property story to tell, everyone has an opinion.  But the reality is that the property market dynamic moves like no other. Even experts can be taken by surprise sometimes, so it definitely pays to be actively up to date: and we’re not just talking the snippets you see in the news headlines.