Author: mortgage_admin

 

According to the latest data from the Real Estate Institute of New Zealand, Auckland’s median house price is at an all-time high of $1.12 million. That’s an increase of 18.5% on March 2020.

The number of properties sold in March also hit new highs. In Auckland, the year-on-year increase was nearly 50%.

And the data also suggests that properties are selling at a faster pace than ever. In March, the median number of days to sell in Auckland decreased from 33 to 31, the lowest it’s been for six years.

However, the supply of housing continues to be an issue. Nationwide, the total number of properties for sale decreased by over 6%. Auckland was one of only a handful of regions to show a slight year-on-year uplift of 5%.

So, what does this all mean? In a nutshell, demand remains high while supply continues to be a problem.

However, this data reflects trends before the government announced policy changes to dampen down the red-hot market. The long-term impact of the policy changes will become apparent over the next few months.

For now, it’s clear prospective buyers need to act fast to secure their dream home.

So, if you are looking to move any time soon, contact us here at Mortgage Suite. Getting mortgage-ready can give you an advantage in a super competitive market. We provide personalised advice on the best mortgage options available.

What Difference Have The Government’s Housing Policy Changes Made?

At the end of March, the government announced significant changes to housing policy. These included extending the bright-line test and removing landlords’ ability to offset loan interest against rental income.

It’s very early days, but already there is anecdotal evidence that investor activity in the market is slowing down. It seems investors are taking a step back to consider the changes, especially as the government has indicated more changes may be announced in May’s Budget.

Similarly, first-home buyers also appear to be taking a more cautious approach. And it’s probably no surprise, given the widespread view that interest rates will rise later this year.

According to the latest ANZ Property Focus report, the possibility of rising interest rates will have more impact than the government’s recent changes.

ANZ’s Chief Economist Sharon Zollner sums up the situation as follows:

‘Interest rates are scarier because of the number of highly indebted households which would be vulnerable if they were to increase, or incomes were to deteriorate.

‘For investors, interest rate increases will no longer bring a larger tax offset.

‘There’s now a greater chance rises in interest rate increases could cause investors to sell up, meaning a faster braking impact on the housing market than previously.’

However, experienced investors with low gearing still see merit in buying and holding for the longer term.

The Reserve Bank’s next announcement on OCR is due on 26 May. While commentators predict the rate will remain at 0.25%, this is likely to change in the coming months.

Mortgage Borrowing Strategy

Mortgage rates have not changed over the past month, leaving the entire term structure of average mortgage rates at what we believe are record lows.

As has been the case for some time, the 1-year fixed-rate remains the lowest rate, and that makes it attractive, and we still like it.

However, with wholesale interest rates rising and the economy rebounding such that yet-lower interest rates are now very unlikely, the key question for borrowers is: does it make sense to fix for longer?

We think it does, and given the low margin between 2 and 3-year rates and 4 and 5-year rates respectively, we see merit in adding some 3 and 5-year terms into the mix.

Doing so will cost more, and while we think there will be plenty of time for those electing the cheaper 1-year to be able to re-fix later, adding some longer terms to the mix will increase certainty.

Do you have a fixed-rate mortgage due to expire? Or perhaps you want to change your fixed mortgage to take advantage of current low-interest rates?

Before you make any decisions, be sure to get in touch. Mortgage Suite’s expert advisers can provide help and advice based on the latest information.

Will Mortgage Rates Rise Or Not?

We all know that the low mortgage rates cannot last forever, but just how long will they last for?

There are two different opinions out in the market currently. Firstly, Reserve Bank Governor, Adrian Orr, is saying that lenders are not doing enough to pass on the benefits they are receiving from a low OCR.

“Orr said the central bank wanted to see its monetary policy support passed on. He set out a “clear message” for lenders.

“We are watching to see what their lending rates do. We’re aware there’s more than one source, there’s wholesale interest rates, deposit rates, but our Funding for Lending Programme provides that shadow opportunity for banks to have a low cost of funding, and that is to be seen to be passed on.”

“We believe there’s more work to be done around passing on interest rate benefits.” [source]

But, then on the other end of the spectrum, some lenders are already preparing for a rate increase.

“Westpac believes borrowers could be hit with higher mortgage rates by the end of the year.

“We expect that the longest-term fixed mortgage rates, such as five-year fixed, will start increasing quite soon. Two-year fixed mortgage rates are expected to start rising late this year or early next,” the team said.” [source]

While we can’t be sure what interest rates will do, we can be sure it is a moving target. So, if you are planning to make any financial moves, it is definitely recommended to take the advice of a financial adviser before committing to anything.

The Best Mortgage Strategy?

With the rise or fall of mortgage rates in question, what is the best strategy when it comes to your mortgage?

Should you be thinking about fixing short-term or long-term mortgage rates?

Well, ANZ has a bit of an answer for you, they have said: “With the OCR on hold for the foreseeable future, we remain confident that borrowers will be able to enjoy low mortgage rates for some time. That’s because 1-2 year rates don’t typically move too far during periods of OCR stability, and banks are continuing to compete for business at the short end of the curve.

“However, borrowers who want to fix for a longer period in order to lock in some certainty may wish to look to longer-term fixes now, mindful that wholesale 4 to 5-year interest rates (the building blocks of 4 to 5-year mortgage rates) have risen sharply.” [source]

The best idea is to chat with a financial adviser about what is the best move for your individual situation. We are happy to help you establish this information here at Mortgage Suite. Reach out to us today.

The Rise Of The New Build?

New Zealand has been in the grips of a housing crisis for a long time. Put quite simply, there are not enough houses in New Zealand for the people that need them.

The solution is, of course, to build more. And it seems that major lenders are in support of this plan. Advisers are beginning to see that the big four banks are becoming more receptive to construction loans.

“ASB is offering up to 85% LVR loans for all new builds, while the other big four banks are offering 90% for owner-occupied new builds, and 80% to investors building a home.

Anecdotal evidence suggests the banks are becoming more receptive as pressure mounts on policymakers to increase supply.

One adviser told TMM Online there had been “significant improvements from just two weeks ago” in the new build market, and believes lenders are under pressure from the RBNZ to grant more construction loans.” [source]

If you have been considering building as an investment or for your own home, then now could be a good time to find out more about your financial position.

Reach out to us at Mortgage Suite if you have questions about any of the above points, or if you would like to know how they could impact your own financial situation.

 

What Is The Property Market Doing?

There is definitely no sign of the housing market cooling. In fact, it appears to be booming more than ever before. Barfoot and Thompson have reported selling 60% more homes in January 2021 than in January 2020.

“This January was the most active January we have experienced as an agency for 17 years,” Barfoot & Thompson Managing Director Peter Thompson said. “Even during the height of the last property cycle we never came close to selling this many homes in a January.” [source]

But it is not only volume that is climbing, prices are climbing along with it. “The value of New Zealand dwellings passed $800,000 for the first time last month, increasing from $788,967 in December last year to $806,151 in January. That was an average increase in value of $554.32 a day.” [source]

It can seem scary when the market is moving so fast. It is easy to feel overwhelmed when you are considering buying or selling property. Which is why it is a great idea to understand your own financial position. Chatting with the team here at Mortgage Suit will allow you to confidently make any decisions when it comes to property. Get in touch with us today.

Will The OCR Change Again?

Since the pandemic began, economists have predicted continuous cuts of the OCR. This made sense with the economy struggling, unemployment rising and inflation remaining stagnant.

However, “unemployment figures today revealed joblessness fell below 5% in the three months to December. Stats NZ data showed a drop in the seasonally adjusted unemployment rate from 5.3% to 4.9%. The surprise figures were enough for ANZ chief economist Sharon Zollner to abandon her prediction of another OCR cut.” [source]

Things are economically better than first feared. It means that the Reserve Bank can take a more patient approach and an expansionary stance. BNZ are even predicting that rates may rise as early as May 2022.

Of course, this will all depend on the state of the economy, but it is good to keep a potential rise in mortgage rates at the back of your mind when making financial decisions in the near future. If you would like some expert advice in this area, then don’t hesitate to contact the Mortgage Suite team.

What Else Is Going On?

Lately, there has been a lot of talk about investors and first home buyers and their activity in the property market. As things continue to boom, banks are starting to take action.

BNZ has joined ANZ by refusing to accept high LVR investor loan applications. Due to unprecedented demand, BNZ has halted investor lending applications unless the borrower has a 40% deposit. A BNZ spokesman said: “With unprecedented demand in the housing market, we are prioritising existing customers and applying a 40% equity requirement for new applications from investors who come via brokers.” [source]

If you are considering an investment property, then you definitely want to seek advice from a financial adviser (like the team at Mortgage Suite) before making any decisions.

A recent study has shown that, the global reverse mortgage market is set to increase threefold in the next decade! “EY’s Global Equity Release Roundtable 2020 survey report reviews data from 13 different markets, and found that the market is expected to soar to $50 billion of equity by 2031.” [source]

It is thought that the increased demand is based on the fact that many people want to stay in their homes throughout retirement, yet simply can’t afford to do so. A reverse mortgage offers them the opportunity to fund the retirement they desire. Again, this is another situation where it is best to seek professional financial advice.

Mortgage Rates

Across the board, mortgage rates have dropped again in the last month. The major banks are all offering 1-year rates around 2.29% if you are bringing a 20% deposit to the table.

But, we should not expect rates to continue to drop in the coming months. In fact, banks are actually predicting a rise in mortgage rates at early as next year.

So, as with any financial decision, it is best to seek advice on your own individual circumstances so that you can ensure you make the best choices. The team here at Mortgage Suite would be happy to help you understand your financial position. Get in touch with us today.

Examples of some of our recent Clients include:

• Apartment construction funding of $35.0m Conditionally approved. This was a case where the client went to every lender via other brokers before contacting us. We are still going through the finalization process but we are hopeful of taking it over the line
• $6.250m funding to assist a client buy a commercial property. We were able to tap into his residential property equities and get the entire loan under residential rates, saving the client over $70,000 pa in interest.
• First Homebuyers, buying off the plans were declined by their bank. We managed to get it approved through another bank and for a higher amount. A very excited couple looking to get into their first home soon.

Soaring Housing Market

It is no secret that house prices have risen significantly this year. With historically low interest rates, less available housing stock and greater demand for houses, it is to be expected.

The housing situation has been called a ‘decades-long’ problem by economists. “Senior economist Mark Smith believes changes are “well overdue”, and policy experts and politicians need to come together to fix the housing market problem.” [source]

There have been calls for the Reserve Bank to add housing prices to their monetary policy. They are already making some moves to cool the price hikes by reintroducing LVRs in March 2021.

If you are considering buying or selling property in the near future, then it is a good idea to sit down with a financial adviser like the team here at Mortgage Suite to understand your position and what options are available. Feel free to reach out for a free, no obligation chat.

Changes To First Home Grants?

The Prime Minister has hinted that she may look to change the eligibility criteria for the First Home Loan and First Home Grant schemes. This is because the house price caps are excluding most properties in the major centres.

In Auckland, the scheme can only be used on a house worth less than $650,000 and the cap is $550,000 in Wellington. As house prices are soaring due to the low-interest rates, more and more homes are being excluded from the schemes.

Adern said about the schemes, “Those are a good place for us to look at and say, ‘Are there ways that we can enable more first-home buyers to use those products?” [source]

We’ll keep you up to date as more information comes to light, but this initiative could make the additional support and funding available to more first home buyers.

This could be positive as a number of first home buyers who are frustrated with losing out at auctions are bidding above their approved finance rate or not conducting due diligence before a property purchase. [source]

Bright Line Test Extension?

While investors breathed a sigh of relief that there wasn’t going to be the introduction of a Capital Gains Tax, they still needed to be conscious of bright-line testing.

“The bright-line test currently requires people who sell investment properties within five years of buying them to pay income tax on capital gains. The bright-line was introduced by National at two years, and extended by the coalition in 2018 to five years.” [source]

There is a growing belief that Finance Minister Grant Robertson will be asking the Treasury about an extension of the bright-line test after having asked for the effectiveness of the current model to be reviewed.

If buying an investment property was on your radar, then this is something to consider.

The Financial Market

The major banks are trying to predict whether the OCR will be cut further in 2021 with Westpac believing the rate will go into negative territory at -0.25%, whereas ASB believes the OCR cuts will halt. [source]

As the decision is in the hands of the Reserve Bank, we will need to see how the economy performs in the coming months to decide whether further cuts are needed. Watch this space!

Another financial concept that is being discussed currently is DTIs (Debt to Income ratios). “The RBNZ governor Adrian Orr this week confirmed the central bank wants to introduce controversial debt-to-income ratios to curb excessive lending, and reduce the risks of going into default if they lose income.” [source]

“It comes amid rising pressure on the Reserve Bank to try and cool the housing market, after lowering interest rates, introducing a funding for lending programme, and scrapping LVRs in May.” [source]

As you can see, there are a lot of factors that come into play when considering borrowing for a home loan. That is why it is always best to speak to seek professional advice from a mortgage broker.

Interest Rates

With interest rates so low, we are getting a lot of calls from people who are interested in breaking existing fixed rates on longer terms. Unfortunately, there is no single solution for all. Our recommendation to break or not varies based on each borrowers situation.

One thing we are noticing is that the borrowers looking to break these longer-term rates, took advice directly from the banks. Only a small number went through brokers. We believe that the advice you get at the time of fixing your loans is as important as the rate itself.

Here at Mortgage Suite, we would love to help you understand your financial position and what options are available. Reach out to us today for a free, no-obligation chat.

What Is Quantitative Easing?

You may have heard the term Quantitative Easing thrown around in terms of stimulating the economy. So, what does it actually mean?

Well, we know that the Reserve Bank is in charge of setting monetary policy for New Zealand. They use a number of tools to keep the economy financially stable. One is the OCR. By keeping it low it stimulates economic growth and inflation.

Another tool they use is Quantitative Easing (QE). Essentially, QE involves the Reserve Bank creating new money and using it to buy existing financial assets like bonds. The extra demand for the bonds lowers interest rates in many areas. This, in turn, creates business confidence, encouraging businesses and consumers to invest more or spend more. The end result… a boost in economic growth.

Because the Reserve Bank utilised the QE strategy, the financial crisis in New Zealand is not as bad as it could have been post-COVID. It has put the country on the road to a ‘tentative economic recovery’. [source]

“The central bank’s chief economist Yuong Ha said it would rather decide it had done too much too soon in response to the downturn caused by Covid-19, than too little too late.” They would rather overshoot their inflation target, than undershoot it, ensuring the economy is stimulated enough for a strong recovery. [source]

First Home Buyers Dominating The Market

While the recovery of the economy as a whole is still in question, it is no secret that the housing market is still booming. And a large part of that is down to first home buyers. They are hitting the market with force!

“First timers borrowed $1.3 billion in August, the highest volume on record, based on RBNZ figures dating back to 2014.” [source]

More and more first home buyers are taking advantage of releasing their Kiwisaver funds and accessing the first home grants. Some lenders are even offering special interest rates for first home buyers, allowing them to break into the competitive property market.

With interest rates at an all-time low and an easing of the lending restrictions in place, now is an attractive time for first home buyers. If you are a first home buyer and would like to understand where you stand financially, then we would love to give you the advice you need at Mortgage Suite. Reach out to us today.

Will The OCR Go Negative?

So, we have talked about the Reserve Bank’s Quantitative Easing strategy to stimulate the economy, but they also have another power up their sleeve. They can also lower the Official Cash Rate again.

Based on weak inflation data in recent months, it is highly likely that the OCR will be cut in 2021. Many economists are predicting that the OCR will go negative in the coming months [source].

Unfortunately, that does not mean that the bank will pay you to borrow their money! But, if it does happen, it will mean a reduction in interest rates. They are thought to drop below 2% in 2021. Of course, this is historically unheard of. But, economists believe it to be a necessary measure to revive the economy.

Record Home Lending

“Mortgage lending hit $7.3 billion in September, the highest value on record, according to the latest Reserve Bank data, as the market continues to defy expectations. Record low interest rates, a shortage of listings, and the end of loan to value ratio restrictions are believed to be behind the surge in housing market activity since the Covid crisis.” [source]

These unique circumstances have people wondering if now is the time to jump into their first home, upgrade the family home, or take on an investment property.

If these thoughts are running through your mind, then now is the time to seek expert financial advice. And that is exactly what we provide here at Mortgage Suite. Get in touch with us today for an obligation-free chat about where you sit financially.

 

 

 

Could Aussie Lending Changes Impact Us?

Recently, the Australian government relaxed their lending laws, removing a lot of the red tape from the lending process.

“The rules have long been blamed for overly-conservative lending by the Australian-owned big four lenders. “The [lending code] has forced lenders to use a calculator as the yes or no tool and not considered the liquidity of assets and quality of the clients.” [source]

While New Zealand lenders are still subject to the Responsible Lending Code, brokers are hoping that the Aussie changes may contribute towards a rethink on mortgage lending in NZ.

If changes are adopted, it may mean that borrowers who did not fit inside the lending box previously have more options available to them. So, watch this space!

Economy Performing Better Than Expected

The economic predictions were looking pretty dire at the end of the second quarter. With COVID-19 ravaging the world and lockdowns impacting trade, things were not looking good.

However, the big four banks now believe that NZ will avoid a worst-case scenario.

ASB said, “Back in May, we were bracing ourselves for a recession double the size of that seen in the 2008/09 global financial crisis, and still found ourselves at the more optimistic range of economic forecasters.

“Subsequently, we have found ourselves nudging our GDP forecasts higher – we now expect the economy to shrink around 5% when comparing the end of 2020 with the end of 2019, vs a 6% decline we had previously forecast.” [source]

While we have not hit the worst-case scenario that was predicted, the economy has definitely been impacted in the last 6 months and action will be taken to remedy it. Many economists believe that that the Reserve Bank will still cut the OCR further to allow for lower interest rates in a bid to help families cope with the crisis.

What’s Happening In The Market

There have been a lot of developments in the financial market this month. This is good news as it gives borrowers more options.

Australian non-bank Resimac has issued a $300 million residential mortgage-backed security, providing funding and liquidity to grow its market share in NZ. This will allow it to lend more money in the New Zealand market.

“Resimac’s continued availability and pragmatic approach have fuelled its record growth over the past few months, with large numbers of mortgage advisers making contact and submitting non-bank deals for the first time. It’s been a lightbulb moment for many as they realise Resimac is a prudent prime mortgage solution for their clients,” Resimac’s NZ leader said. [source]

Having non-bank lenders in the market allows borrowers more options. It is particularly useful for non-traditional borrowers. If you are interested to know what options are available to you in this current market, then get in touch with the Mortgage Suite team today for advice you can rely on.

The News Isn’t All Bad

While we are in the midst of a shrinking economy, the news is not all bad.

The decisions that the Reserve Bank made in 2020 have helped to boost buyer confidence in the property market. In fact, “according to the Reserve Bank’s latest figures, lending hit $6.7 billion, up from $5.3 billion in August last year and $5.4 billion in August 2018. Last month’s total marked the highest lending on record for an August, based on RBNZ data going back to 2014.” [source]

The economy may be in a good position to return earlier than first thought. “The central bank noted a strong housing market “may indicate a stronger recovery in consumer spending and residential construction if sustained.” [source]

New research from CoreLogic has indicated that Kiwi households are spending an average of 32% of their income on their home loans. “According to the research firm, New Zealand households were spending 49% of their income on their mortgages in 2007, before the global financial crisis. The long term average is about 34%.” [source]

“CoreLogic’s Kelvin Davidson said: “Generally speaking we can see that affordability has improved/stabilised in recent years.” [source] So, now could be the perfect time to explore your options. Get in touch with the team here at Mortgage Suite to find out what your current financial situation allows.

MORTGAGE BORROWING STRATEGY 

Our recommendation of 12-month rates for the last 3 years seems to be working in our favour. Home loan rates are little changed over the past month, with the only perceptible change being the circa 0.15% decline in the average 6-month rate. The 1-year rate remains the “sweet spot” and is still the term that we believe offers the best value. Although we expect the OCR to go lower in April, which is just over six months from now, analysis shows that it is still likely to be cheaper to opt for the 1-year, rather than fix for six months with a view to re-fixing again in six months. That’s simply a reflection of more competition in 1- and 2-year terms. With OCR hikes years away and the RBNZ flagging the introduction of a “funding for lending” programme expressly designed to lower retail interest rates, we see the limited appeal in fixing for more than one year, unless one puts a high value on certainty.

Approval Turn-around Times

Lenders are taking between 8-12 working days just to pick up an application. As Brokers we ensure that all information is provided upfront to get it right first up, otherwise, it can go back to the end of the Queue again.

What Is Happening To The Economy?

It is no surprise that the economy has had another wobble with the reinstated lockdown procedures in Auckland, and level 2 restrictions in the rest of the country.

Business confidence is low as trading feels uncertain. It is hard to predict what the future might look like with the ever-present threat of COVID in the air. Will we need further lockdowns? How will this impact businesses, jobs, and communities?

Unfortunately, no one really knows what the future holds on this front. What we do know is that the economy has already started to contract. And it has done so at a pace steeper than we have seen in the last 3 decades. We expect to see more of this in the coming months, with the economy projected to contract 5.5% in 2020. [source]

What does a contracting economy mean for the average New Zealander?

Well, if you cast your mind back to the global financial crisis of 2008-09, it could be something like that. Unemployment will likely rise, imports and exports will be impacted due to many international borders closing, and GDP is set to decline.

Now is a really good time to seek advice on any financial moves you are considering making. An independent financial adviser can help you to understand what your position is and what external factors can influence it. The team of expert financial advisers at Mortgage Suite would be more than happy to help you navigate the current financial situation. Get in touch with us today.

Negative OCR – What Does It Mean?

With the return of COVID-19 to New Zealand’s shores, economists are buzzing with what that might mean for the economy. The widely accepted opinion is that the Official Cash Rate (OCR) will reach a negative value early in 2021.

“The key message from the RBNZ last week was that they are prepared to pull out all the stops to get NZ interest rates lower and support the economy,” the economists added. “The Bank’s quantitative easing programme was ramped up by more than anyone expected and the chances we see negative interest rates next year are now much higher.” [source]

So, what would a negative cash rate mean?

Well, for a start, mortgage rates are likely to drop again. We may even see the rates down below 2% in 2021. While this is great for borrowers, what does it mean for savers?

The banks are not intending to charge you to keep your money in a savings account. However, savings interest and term deposit rates are likely to take another hit. If you do have funds saved, then term deposits may not be the best option for your situation. Have a chat with a financial advisor, like the team here at Mortgage suite, to explore what options are available for your nest egg.

If you need to know more about your options for your current situation, then get in touch with us here at Mortgage Suite for a free no-obligation chat.

 

 

Extended Mortgage Holidays

Finance Minister Grant Robertson has indicated that the extension of mortgage holidays would be “justified” for those that are still struggling with their mortgage payments as a result of COVID-19.

“During the Covid-19 lockdown in March, the Reserve Bank, government and retail banks agreed a support package to grant payment deferrals or shifts to interest-only for six months, to help hard-up households.

As the six-month period nears its end, politicians are keen to avoid a spate of home loan defaults and are reviewing further breaks for those who have lost their jobs.

Robertson told Stuff: “The advice that I’ve had from the Reserve Bank is that they are considering looking at the extension of the mortgage deferral schemes – of the support that they give to enable the banks to provide those schemes – and I think judging from the conversations I’ve had with trading banks, that would be justified.” [source]

As we have indicated in the past, you need to think very carefully about whether a mortgage holiday or interest-only loan is right for your circumstances. The repayment obligation does not disappear in these agreements, it simply gets delayed. So, if you are considering which path is right for you, we strongly encourage you to get in touch with us to discuss how each option could impact you financially.

A Negative OCR?

The Reserve Bank are set to review the Official Cash rate in August. Most economists believe that the OCR will be kept at 0.25% at this stage as there is no clear reason to lower it right now. However, that may not be the case in the future.

If we continue to see a negative economic impact due to COVID-19 fallout, then there is a greater possibility of a negative OCR. In fact, the Reserve Bank has already warned lenders that there is the possibility they need to prepare for a negative cash rate next year.

Brad Olsen of Informetrics believes negative rates are on the cards. “We expect the Reserve Bank will take the OCR negative by mid-2021 once retail banks are able to implement a lower rate,” Olsen said. “However, we expect to see the Reserve Bank make it clear publicly ahead of this move, what its preference is between a lower OCR and an expanded LSAP program, which will provide us with greater direction as to the likelihood of the move.” [source]

A negative OCR could mean that interest rates fall even further, so it is a case of watching and waiting to see what might happen.

Easing Of Servicing Tests?

Before any lender will approve a loan, they need to confirm that you are able to meet the repayments based on your individual financial position. This is done by conducting a servicing test, to confirm you can “service” the loan repayments.

ASB and ANZ have recently announced they have reduced the rate of their servicing tests to fall in line with the current climate. This takes into account the record low-interest rates we are experiencing right now.

It may allow some borrowers to borrow up to an extra 10% from ANZ. Brokers are hoping that both BNZ and Westpac also relax their servicing test rates to meet the current economic climate. [source]

With all these changes taking place in July, it is important that you seek advice from a financial expert like the team here at Mortgage Suite before taking any action.

We can help you to see what options are available to you regardless of whether you want to seek new lending, restructure, or top up your current loan, or simply to refix your current interest rates.

We are always here to help by phone, video conferencing or in person, so drop us a line today.

 

 

The OCR Holds

The Reserve Bank has decided to keep the OCR at 0.25 percent for now. Their reasoning was as follows…

“New Zealand has contained the spread of COVID-19 locally, for now, enabling relaxation of social restrictions and an earlier resumption of domestic economic activity than assumed in our May Monetary Policy Statement. The Government’s intended fiscal stimulus, announced in its May Budget, was also slightly larger than we assumed. These outcomes give cause for some confidence but significant economic challenges remain.” [source]

What does that mean for the future?

Well, the Reserve Bank will continue to monitor the economic status of the country. They are hoping that the Large Scale Asset Purchase (LSAP) program they have put in place will continue to balance economic risk. It is targeted to keep rates low for the foreseeable future in an attempt to strengthen the economy.

However, they will look to alternative measures in August if the LSAP program does not generate the results needed. There is always the potential for a further reduction in the OCR, so watch this space for now!

How Low Can They Go?

It seems that every month we are reporting a new historically low-interest rate and June is no exception. Mortgage rates have gone down again with all the banks shaving points off their fixed or floating rates.

Just how low can they go?

“Nikko Asset Management’s head of bonds and currency Fergus McDonald believes the concerted effort to lower interest rates will lead to even cheaper mortgages in the coming months.

“I still think there will be a further round of mortgage rate cuts in New Zealand,” McDonald said in a webinar. “The banks are awash with cash. They can borrow as much as they want really from the Reserve Bank at 25 basis points. It wouldn’t be at all surprising to me if we have mortgage rates at some stage starting with a one.”[source]

Mortgage Lending Up In May

There are signs that the property market is starting to recover after being put on pause during the nationwide Level 4 lockdown.

“Total mortgage borrowing hit $4.3 billion last month, up from $2.7 billion in April, according to the latest Reserve Bank data. The figures reflect a month where most New Zealanders were in lockdown under alert level three, before moving to level two in mid-May.

The data underlines a recovery from the depths of stricter lockdown levels, which halted most property market activity.” [source]

New listings are coming to the market again, with several regions of the country being tagged as buyer’s markets. So, there is definite activity out there. Plus, May was the first month that we saw the scrapped loan-to-value ratios that were previously in place.

If you are looking to explore your options at this time, then the Mortgage Suite team would love to sit down with you (or chat via phone) to discuss your current financial position and what might be possible.

Give us a call today!

What Is Going On In The Financial World

It is no surprise to learn that April was one of the lowest months on record for mortgage lending. Obstructed by social distancing and no open homes, the real estate market definitely took a dive over lockdown.

Coupled with many opting to take on deferred payments or interest-only options on their existing mortgages, banks were thrust into a stage of treading water.

The Reserve Bank notes, “housing market activity only resumed a few weeks ago as the nation entered level two lockdown. The sharp fall underlines the huge damage caused by Covid-19, with activity unlikely to reach pre-lockdown levels for several months.” [source]

With the housing market on the go-slow and unemployment rates set to rise, many economists are predicting another cut in the OCR before the end of the year. This could provide some level of relief as mortgage rates are likely to drop with the OCR. But on the flip side, it is not good news for savers as those interest rates will drop too.

We have already seen inklings of this with all of the major banks dropping a number of their fixed-term rates below 2.7%, plus term deposit rates have plummeted.

What Does It Mean For You?

What it means will depend on your current financial situation. If you have found yourself without employment or on reduced earnings, there are a number of options available.

The government has announced an extension of the wage subsidy scheme for certain qualifying businesses and also support payments for those that have lost their job due to COVID-19.

It is also still possible to explore the idea of deferred mortgage payments or converting your loan to an interest-only payment for a short while. This will be a short term solution, however, you need to consider the fact that your loan will be restructured as a result. It is helpful to discuss this with a financial adviser before making a decision.

“By shifting loan repayments to future dates, payment deferrals ultimately increase households’ debt-servicing burden over the remaining term of their borrowing,” the Reserve Bank’s stability report stated. “If current pay reductions and elevated unemployment persist for a longer period than expected, households and banks may find that more substantial loan restructuring or remediation is necessary when deferral periods end.” [source]

If you are considering entering the housing market at this time, you need to be sure of your financial position. If you are still in a strong position, then now could be the time to buy. Mortgage rates are low and the banks have reduced their LVR restrictions. However, you need to be certain you can service the mortgage now and into the future.

Why You Should Take Financial Advice Right Now

In these confusing times, it can be hard to know what is the best option for your family. There are many different scenarios coming into play and it can be confusing to think about what applies to you and what doesn’t.

That is why it is important to consult with a financial expert like the team here at Mortgage Suite. We can look at all the contributing factors from an impartial position. That means we can take all of your personal circumstances into account and look at them from a logical perspective.

We also have the knowledge of what is currently available on the market, so we can run the numbers on several different possibilities. That way, you have all the information you need to make an informed decision.

More important than all of that, we are here to answer any questions you might have, dispel your fears and help you make a decision that you are comfortable with.

So, if you need some help deciding which is the best path forward in the current market, then get in touch with us today.