Financial Subsidies

The government are currently offering subsidy payments to businesses that have been impacted by COVID-19. There are currently two different options available:

Wage Subsidy: This subsidy is designed to help employers (including sole traders) to continue to pay wages and retain their employees if they have seen a downturn in business. To qualify, your business must have seen a 30% decrease in income during one month of the COVID-19 experience. There are options to apply for both part and full-time employee subsidies. The figures are set at $350 per week for part-time staff and $585.80 per week for full-time team members. You receive a lump sum payment that is designed to cover 12 weeks of support per employee.

Leave Support Scheme: This scheme is designed to help employers continue to pay their staff who are unable to work due to COVID-19. This could be as a result of the Ministery of Health guidelines or if employees are unable to work from home.

Please note that businesses can only apply for one of the subsidy options, so it is important to determine which is the best fit for your business.

If you are an employee who is facing reduced hours or redundancy, you cannot apply for the subsidy directly. However, you can encourage your employer to apply for the subsidy if they have not done so already.

Mortgage Holidays

Many people have found themselves on reduced income as a result of business closures and virus restrictions. If this is the case and you are finding it hard to meet your mortgage repayments, banks are currently offering various options.

The first is to convert your mortgage repayments to interest-only terms. This means that you do not pay anything off the principal amount of your loan, but also do not add to the value of your loan either as you still pay the interest portion.

The second option is a “mortgage holiday”. This is where you can defer the repayments on your mortgage for up to 6 months. Before rushing into this option, you need to think carefully about whether this is the right move. The repayment amounts do not simply disappear, rather they increase the duration of your mortgage and incur additional interest. In saying that, taking this option could mean that you protect your home.

If you are considering either of these options, we would encourage you to speak with a financial adviser, like the team here at Mortgage Suite. We can help you run some numbers and work out which is the best path forward for you.

Send us an email at info@mortgagesuite.co.nz

Rent Relief

There are currently no direct rent relief subsidies in place for commercial or domestic rents due to COVID-19. However, some landlords are receptive to individual requests if you approach them and explain your situation.

The government have put a freeze on landlords being able to increase rents or terminate leases during this time. There is also talk that they are working on solutions for commercial leaseholders, so we will watch this space intently.

The Economic Climate

Economists have been buzzing about what the long term impact of this global pandemic will mean for the economy. There is talk that the OCR may even drop to a negative figure in the coming months.

What we do know is that the Reserve Bank has decided to remove LVR (loan to value ratio) restrictions for the next 12 months. Before these restrictions were removed, banks were only allowed to lend a certain amount to borrowers who had less than a 20% deposit.

The recent changes will allow banks to assess the individual circumstances of “credit-worthy borrowers”, regardless of their deposit figure. [source]

As always, we strongly recommend anyone seek expert financial advice before making any decisions that could impact your personal or business finances.

The team here at Mortgage Suite are always on hand provide expert guidance and help at no cost to you. So please do not hesitate to contact us if you need advice.

We are continuing to operate at levels 2 and 3 while adhering to strict social distancing protocols. It is amazing what we can achieve via phone or video call!

The OCR

This month, the Reserve Bank revealed they have decided to keep the official cash rate (OCR) on hold at 1%. There have been promising signs of economic growth with employment at its maximum sustainable level and inflation close to the 2% target range.

They expect this growth to continue into 2020 with indications of strong government investment, increased infrastructure and higher household spending.

However, it is not all smooth sailing. “Soft momentum in economic growth has continued into early 2020. Slower global growth over 2019 acted as a headwind to domestic growth. In addition, competitive pressures and recent subdued business confidence have suppressed business investment.

The global economic environment has shown signs of stabilising and trade tensions have receded somewhat. However, the Covid-19 (coronavirus) outbreak is an emerging downside risk.” [source]

At this stage, the “Reserve Bank’s forecast OCR track now has no further cuts pencilled in, and has a hike forecast for 2021.” [source]

So, what does all that mean for mortgage rates?

Interest Rates

The news is not new that interest rates are low. In fact, they have been low for the last 12 months. But, will they continue to stay this way?

The Reserve Bank has recommended that they do. “Low-interest rates remain necessary to keep employment and inflation around target.” [source]

At this stage, New Zealand’s economists predict that the rates will remain low throughout this year and next. They believe, “the Reserve Bank will hold off raising the OCR for a couple of years, with rates rising to a high of 2.25% in the coming cycle.

The bank expects a “series of mild hikes” from 2022 after a long period of low rates for borrowers. If correct, the prediction could see mortgage rates hover around current levels for the next 18 months.

The bank still expects NZ and global interest rates to remain “historically low”, with policy rate cuts from other central banks this year.” [source]

At this stage, the RBNZ has pencilled an increase of 25 basis points in 2021, with a further increase of 75 basis points by the end of 2022. So, it looks like low-interest rates are here to stay for a bit longer yet.

What Are The Banks Doing?

For the last year, banks have constantly been at war to secure mortgage customers by competing on who can offer the lowest rates. It has worked out pretty well for borrowers. But, that could be about to change.

KPMG’s latest financial report “suggests the RBNZ’s new capital regime could prompt an end to the “mortgage war” triggered by OCR cuts last year.” [source]

“The report suggests last year’s OCR cuts, notably the 50 basis point cut last August, gave banks more “wiggle room in their margins to drop rates and compete on price and volume”. It described the resulting mortgage war as an “unintended consequence” of the rate cuts, “just after house prices had stabilised”.

The report predicts upward pressure from the central bank’s new capital rules.” [source]

Basically, it means that borrowers should not count on rates remaining this low forever. However, the “mortgage wars” that have been taking place will probably mean that rates are unlikely to skyrocket just yet.

Right now is the best time to check your financial position to see if your current borrowing is right for you or if a review is needed. You can also explore if any new borrowing is on the cards so that you can get into your first home while the interest rates are low.

Get in touch with us here at Mortgage Suite to find out what is the best financial option for you and your family today.

Strong Mortgage Lending

According to the latest figures from the Reserve Bank, mortgage lending was very strong in December.

“At $6.53 billion, total mortgage lending last month was more than $1 billion higher than December 2017 and 2018, according to new RBNZ statistics. A total of $5.3 billion was borrowed in December 2018.

While total lending was down on November’s $6.7 billion, the figures underline a resurgent housing market, boosted by record-low interest rates, in the final months of 2019.

With the exception of November 2019, last month marked the highest mortgage lending figures since May 2018.” [source]

It is thought that the reduction of the OCR and the government’s withdrawal of the proposed Capital Gains tax has generated a bit of a property boom. The market is strong and with such low-interest rates, now is a great time to make your next move in property.

Buyers are ready and willing with the cash, so it is a great time for sellers. But it is an equally good time to purchase if you are a buyer with these historically low-interest rates in play. The first step is to assess your own financial position. And the easiest way to do that is to contact an expert financial adviser like the team here at Mortgage Suite. Give us a call today!

Will The OCR Drop Again?

Back in August 2019, the Reserve Bank shocked the financial world by cutting the OCR to just 1%. This shock move created predictions and speculation about what their next move would be. Many predicted that the OCR would fall further in an attempt to boost the economy.

But November came and went without a further reduction. And now predictions are starting to change.

“The improved economic outlook prompted ANZ to change its OCR outlook last week. The bank now predicts rates will stay on hold, and no longer believes the Reserve Bank will slash rates in May.

“We take some comfort from the fact that the recent stabilisation has been fairly broad-based. To be sure, it’s not a picture of growth taking off by any means, but thus far it appears consistent with the RBNZ’s November MPS forecast for a gradual improvement in growth into 2020,” ANZ said last week.” [source]

What that means is that the current interest rates are set to stick around for awhile longer yet.

Will House Prices Rise In 2020?

The question on everyone’s lips is whether or not house prices will rise in 2020. The answer is… most likely. Leading economist Tony Alexander say all signs point to an increase in house prices as the year continues.

“Net migration numbers are strong and only slowly falling,” Alexander said.  “Interest rates look like staying low for ages. The jobs market is strong. Consumer confidence is good. Export commodity prices are firm. World growth looks okay if unspectacular. Fiscal policy is easing. Capital gains tax plans got squashed. Rents are rising strongly, especially at annual review time now. Airbnb is taking up more housing stock,” he added.

Advisers and market commentators predict a strong start to 2020. According to the latest REINZ data, December was the busiest final month of the year for house sales for three years. The REINZ House Price Index increased by 6.6% nationwide last year.” [source]

The good news is that if you are buying and selling in the same market, you are largely unaffected by rising house prices. If you are new to the property market then don’t despair. There are still plenty of opportunities to get on the property ladder.

And the Mortgage Suite team can help you do it. Give us a call today to see where you stand when it comes to your finances and what the property market has to offer for you.

 

 

Changes To Standard Sale & Purchase Agreements

Almost any Sale & Purchase Agreement for property will contain a clause pertaining to the buyer’s finance. Basically, this clause gives buyers the freedom to pull out of an agreement if they suddenly find that they cannot obtain finance from their lender.

This is a great safeguard for anyone that has to borrow money to complete their property purchase. Unfortunately, for some buyers, it has also become an easy out if they change their mind about the property.

Until now, the buyer’s word was sufficient proof that they could not obtain finance. But, in the recently launched tenth edition of the REINZ/ADLS Agreement for Sale and Purchase, this will not be able to happen.

Buyers may need to show a letter from their bank stating that the finance has been declined. If they cannot produce the letter or reasonable evidence they have tried to obtain finance, then they could be in trouble.

“According to Bindi Norwell, chief executive of REINZ, this means borrowers could be forced to complete a purchase even without finance, posing a danger to any buyer entering into a sale and purchase agreement. 

Norwell said: “This is a significant change to the sale and purchase agreement and it’s imperative that consumers understand the implications as if they can’t provide evidence they can’t raise the finance, they could be forced to proceed with the purchase or face other legal action by the vendor.” [source]

To prevent this from happening, it is strongly advised to seek financial advice from a mortgage broker (like the team here at Mortgage Suite) before entering into any agreement.

Why Do Interest Rates Continue To Fall?

“On Friday, BNZ cut two of its classic home loan rates, slashing its one year to 3.49% for owner-occupiers, and 3.74% for investors. Its 18-month rate falls to 3.39% for owner-occupiers, and 3.64% for investors, representing the second cheapest in the market behind Chinese lender ICBC.

BNZ’s moves come after Westpac slashed its one year rate to 3.39%, joined by Kiwibank and ASB.” [source]

But why do the rates continue to drop?

When the Reserve Bank chose to put the OCR on hold in November, they were hoping it would result in increased mortgage rates to borrowers. The wholesale rates went up, but the lenders are continuing to compete on price.

Of course, if one lender does it, then the others have to follow suit or they risk losing business. But, just how low can these rates go? We will need to watch this space to see what happens going forward.

LVR Limits Remain The Same

While lots of things have been changing in the financial world, LVR limits are not one of them. The Reserve Bank has decided that the current limits will remain.

“LVR limits have been “successful in reducing the more excessive household mortgage lending”, The Reserve Bank said. The central bank added LVR rules have improved the resilience of banks to a deterioration in economic conditions. 

Yet fears of excessive-high LVR lending have made the central bank decide against loosening rules from current levels.” [source]

The Reserve Bank were fearful that borrowers may take on more debt than they can handle, should the historically low-interest rates begin to climb back up again.

“Current LVR rules will remain in place for the medium term. Up to 20% of loans to owner-occupiers can have deposits of less than 20%, and up to 5% of home loans to investors can have a deposit of less than 30%.” [source] 

So, what does it all mean? With all the changes taking place in the market, it is best to speak to a financial adviser to see exactly where you stand. The team here at Mortgage Suite can help you to work out what is the best option for your personal circumstances.

Get in touch with us today for a free, no-obligation chat.

Will The OCR Drop Again?

There are mixed opinions in the market as to whether the OCR will be cut further in November. Currently, there are two distinct opinions running.

The first is that the OCR will be cut further due to low business confidence. In fact, at the end of September, NZIER data revealed that business confidence was the lowest we have seen since 2009.

“Westpac economists, including Dominick Stephens, say the weak confidence “adds to the likelihood of another OCR cut at the November Monetary Policy Statement, despite the RBNZ’s seemingly noncommittal comments at its September review” [source].

On the flip side, there is the belief that the “pickup in the housing market could give the Reserve Bank “pause for thought” over further official cash rate cuts”. Some economists are predicting that it is not a given that the OCR will be cut further in November. “The expected November cut – fully priced in by swap markets – is “not a done deal”, and the central bank could be swayed if inflation data turns out better than expected.” [source]

So, will the OCR drop or won’t it? Only time will tell!

Strong September

Part of the reason that the OCR cut is not a done deal is the strengthening housing market. This is largely down to the banks loosening their serviceability tests. As a result, lending skyrocketed in September.

“Total lending jumped to $5.5 billion in September, up from $4.7 billion in September last year and $4.5 billion in September 2017, according to newly-released figures.” [source]

It is the first home buyers that make up a big chunk of that figure. They represented $967 million of the total lending, up from $821 million in September last year. The rest of the bulk comes from other owner-occupiers with $3.4 billion of lending, up from $2.8 billion this time last year. Investors remained largely constant from last year.

“Analysts credited the lending increase to banks’ relaxed serviceability rules. Australian regulator APRA abolished its minimum testing rate for banks in August, and the move is acknowledged to have had an impact here.” [source] 

Mortgage Rates

At the start of the year, we were marvelling over the fact that interest rates had dropped below 4% and stayed there. Now, there is a whole new level of marvelling to be done. 

All of the banks now have 2-year rates below the 3.5% mark!

The question is, how much lower can they go?

The general consensus is that the rates will likely stay low throughout the rest of 2019 and into 2020. But, it is best to still act with caution for any borrowing. ASB economists feel “it is prudent for borrowers carrying debt for longer than the next couple of years to budget on higher mortgage interest rates in the longer term. However, we expect mortgage interest rates to eventually settle at levels that remain below long-run averages of the past 20 years.” [source]

What is certain is that now is a great time to explore your options in the financial market. With relaxed lending criteria and record low mortgage rates, there has never been a better time to review your current lending or to consider your next move in the property market.

Whatever your plans, it is always best to seek financial advice. Get in touch with us here at Mortgage Suite for expert advice. We can help you look into your current financial position and see what options are available to you. Give us a call today.

OCR Rate Remains Steady

Amongst a sea of speculation, the Reserve Bank has decided to keep the Official Cash Rate at 1.0 percent. This decision is based on the fact that the last drop in the OCR seems to have had the desired impact for now.

“Stephen Toplis, head of research at BNZ, said the announcement was “almost identical to what we had anticipated”.

Toplis added: “The Reserve Bank governor was on record as saying that the drop of 50 basis points allowed them to get ahead of the market, and reduced the need for more cuts later … They have maintained an easing bias, and our view is that November is the more likely timing for the next move.” [source]

As you can see, the Reserve Bank has not ruled out further reductions to the OCR in the near future. Employment is around its maximum sustainable level, inflation is low, and the global demand for NZ products is dampening. Business confidence is also low, impacting investment decisions. All of this points to a further drop in November, but we will have to wait and see what the outcome is.

Interest Rates

Interest rates continue to fall, with banks all offering 2-year rates below 3.5%. Again, rates have hit an all time historical low. But why do they continue to fall?

“Global long-term interest rates remain near historically low levels, consistent with low expected inflation and growth rates into the future. Consequently, New Zealand interest rates can be expected to be low for longer.” [source]

It really has never been a better time to lock in fixed rates for your mortgage. If it has been some time since you have reviewed it, or your fixed term rates are coming up for renewal, then don’t hesitate to get in touch. I can help you secure the best rates, that could even be better than the advertised ones.

KiwiBuild Reset

The Kiwibuild scheme is officially over. The plan to build 100,000 affordable homes has now been scrapped. But, it is not all bad news. The government has reset the policy with some positive changes.

The change that is likely to have the biggest impact is the reduction of the deposit required for a KiwiSaver HomeStart loan. It is now known as the First Home Grant and first home buyers will now only need a 5% deposit, as opposed to the previous 10% requirement.

“Many commentators, such as REINZ chief executive Bindi Norwell, have welcomed the move, saying it will significantly help a number of first home buyers. Norwell says that saving for that initial deposit is often the biggest hurdle to getting on the property ladder.” [source]

Westpac has confirmed their commitment to the Welcome Home scheme, along with Kiwibank and some other small lenders. Many hope the rest of the Big Four banks follow suit and adopt the scheme.

While the deposit aspect is now easier to meet, banks will be more stringent with their servicing criteria to ensure borrowers can afford the repayments. So, you will still need to have your finances in good order, even with the regulation changes.

If you are considering buying your first home, it could be time to have a look at your finances. Get in touch with us here at Mortgage Suite and we can check your affordability. There really is no better time to check your position with the market picking up for Spring and the interest rates so low! 

 

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.