A corner dairy in Mangere sold this afternoon at the Bayleys Total Property Auctions for $1,615,000.
To be fair, it was actually three tenancies, a superette, a takeaway, and a liquor store.
Located at 113 Favona Rd rental income was $52,064 p.a. providing a gross yield of 3.22%.
The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5 percent.
In a further direct reference to Auckland’s current housing market he said..“In the meantime high house price inflation persists, especially in Auckland. As has been noted for some time, the Reserve Bank does not want continued high house price inflation to compromise financial or price stability. Recently introduced restrictions on high loan-to-value mortgage lending are expected to help slow house price inflation and the Bank will continue to monitor the situation closely.”
And…“Although we expect to keep the OCR unchanged in 2013, OCR increases will likely be required next year.” A nod to increasing floating interest rates..
Go Sonny Bill and The Kiwis!! 
Well, there has been a flurry of emailed updates from the major lenders over the past 6 weeks..
Fee’s, interest rates, and credit policies have all been getting tweaked. (not twerked)
Among the changes are new Low Equity Premium fee’s, separate sets of interest rates for over 80% lending, and fee discounts that might once have been available are all but gone for the over 80% borrower.
These additional costs are adding up.
As an example, ANZ is applying a 0.5% margin on interest rates over 80%. On borrowing of $550,000 that’s an additional $2,750 p.a.
Borrow between 85% and 90% with Westpac and the Low Equity Margin is 1.15%. On borrowing of $550,000 that’s an additional $6,325 p.a.
With these sort of costs one would imagine requests to Banco De Mum n Dado will be on the increase…
Confirmation came through yesterday from the Reserve Bank that from October 1st, only 10% of Banks new lending can be on a Loan to Value (LVR) ratio over 80%.
Some loans, such as bridging loans and loans that remain at a high LVR level if you move house, are excluded.
Plenty of industry commentary has suggested that first home buyers will be severely affected although it’s easy to see how many will get around the restrictions by borrowing additional funds from Family to meet the 20% deposit requirement. A boon for Lawyers no doubt, as an additional party will need comprehensive legal advice.
Also affected by the reduced amount of lending available will be the more aggressive property investor looking to gear to the maximum to obtain an additional property, as Banks have traditionally preferred to lend to an owner occupier at high LVR’s rather than investors.
It’s been interesting to read the Bankers Association complaining that the home renovator may face increasing difficulty to get a top up loan. One’s mind drifts back to 2008 / 2009 when Banks, by their own decree rather than the Reserve Bank’s, limited lending to 80% LVR’s. At the time we were told it was about stability and “sustainable loan serviceability”. Neither of which are such a concern currently it seems… 
So, as a first home buyer, what are some things we can do to make ourselves as attractive as possible to obtain some of the reduced lending available?
One would be to pay off any short term debt, such as Credit Cards and GE / Farmers Cards and the like. Another, and probably pretty obviously, is to SAVE. And be able to demonstrate a track record of saving.
Hop onto an online calculator (or ask your friendly mortgage broker ) and work out what your expected mortgage repayment would be on an amount you are intending to borrow and add a margin onto the interest rate you’re calculating it with. Work it out on say 6.50% rather than the sparkly looking 1 year advertised rates of 4.95%.
If your monthly rent payments when added to your monthly savings amounts exceed the number above, and you can demonstrate via your bank statements that you have been able to manage this for some time, then you are on your way to highlighting to the lender that you can manage a mortgage repayment.
Enjoy foiling upwind. !
The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5 percent.
A warning shot was fired across the housing market with… “The extent of the monetary policy response will depend largely on the degree to which the growing momentum in the housing market and construction sector spills over into inflation pressures.”
“Monetary policy response” means movements in the OCR, a direct influence on your Floating or Variable home loan interest rate.
Yesterday afternoon ANZ Bank announced an increase in 2,3,4 and 5 year fixed interest rates effective today. This is the 2nd announcement of increases in these fixed interest rate terms in less than a month.
5 years fixed goes to 6.60% which is now quite some distance from a discounted floating rate. I wonder how many will opt for an immediate cost increase of a move off floating to the 5 year fixed rate as a trade off for the certainty of long term borrowing costs….
2 years fixed gets tweaked 15 basis points to 5.65%.
ANZ is out this afternoon with a rise in 2,3,4 and 5 year fixed interest rates effective tomorrow.
3 years fixed goes to 5.95% from 5.80% and 5 years fixed to 6.45% from 6.30%.
This follows on from ASB raising 3,4,and 5 year fixed interest rates last week.
10 year treasury yields in the States took off like a scalded cat last week from mid ones to mid twos and our own 5 year swap rate at the time of writing up today at 4.06%.
The Reserve Bank confirmed back in May that by dipping into a newly created toolbox, it intends to increase the amount of capital the Banks have to hold to cover lending at Loan To Value ratio’s (LVR’s) over 80%. Given that lending above 80% LVR makes up about 20% of home lending and perhaps more importantly 30% of new lending, its hoping that by doing so, some of the current “exuberance” may ease at the margins of the (read Auckland) property market.
Translation, the cost of these loans will go up for low deposit home purchasers.
In an extremely unscientific analysis, scanning back thru ones memory bank of recent loans over 80% to 1st home buyers, next to every one of them has involved in part, a gift or interest free loan from Mum and/or Dad. You wonder then if a side effect maybe that Parents should prepare for a larger tap on the shoulder with respect to house purchase deposits as the kids attempt to avoid increased loan approval fee’s.
And while these Reserve Bank changes are expected to be formalised in September we have seen ASB and Sovereign move in advance today by announcing that from Monday the charging of Low Equity Fee’s (LEF’s) on lending over 80% will recommence. Fierce market competition had meant that in recent times these fee’s were being reduced or waived.
Also getting a tweak is the set interest rate used to determine an applicants loan affordability from 6.0% to 6.50%. The net effect of this is that the amount one can borrow on any set income just reduced.
The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5 percent.
Reserve Bank Governor Graeme Wheeler said: “Reflecting the balance of several forces, we expect annual GDP growth to accelerate to about 3.5 percent by the second half of 2014, and inflation to rise towards the midpoint of the 1 to 3 percent target band. Given this outlook, we expect to keep the OCR unchanged through the end of the year.”
The Auckland property market got a repeated warning in the form of “In the meantime rapid house price inflation persists in Auckland and Canterbury. As previously noted, the Reserve Bank does not want to see financial or price stability compromised by housing demand getting too far ahead of the supply response.”
I’m keeping an eye on rising bond yields in the United States as a result of “tapering” concerns.
I’m not sure exactly, but i estimate over the years i have witnessed possibly in excess of 1,000 house auctions. As a result one sees all sorts of methods of tackling an auction. Right through from the hands remaining firmly in the pockets and say nothing method, to a more bullish approach of starting the Auction off high and trying to scare the other bidders off early.
Given recent media attention to the strength of the Auckland housing market, and commentary of folk “missing out” at auctions, Wednesday will go down as one of the all time most unusual auction strategies that i have seen, although not one that could be recommended to many, if any.
Up for Auction was 135 Mt Albert Rd in the city fringe Auckland suburb of Mt Albert, which appeared to have possible development potential given it was on a north east facing site of 1516 sqm. The auction opened with a bid from the floor of $700,000.
A counter bidder seated upfront calmly elevated his arm raising the order of sale aloft to take the next bid. To the surprise of many, including myself and a somewhat startled auctioneer, he then left his arm aloft thru the entire auction which was moving in $50,000 increments until he held the top bid at $1,500,000. Talk about sending a confident signal to the other buyers in the room. Not long after some of the under bidders had picked their jaws up off the floor, the property was knocked down to him at $1,580,000.
Oh to have the confidence and financial wherewithal to bid in such fashion hey….
Most of the major lenders are currently offering 1 year home loan fixed interest rates of 4.95%, most with various conditions attached, such as being being financed at under 80% of the properties value.
The Auckland property market, as widely reported, continues to truck along. At auction yesterday a 3 bedroom 158 sqm brick and tile unit in Rewi Rd, Royal Oak, was knocked down at $803,000.
This was followed by committed bidding on a “character brick homestead” on a corner site of 1012 sqm at Astley Avenue in New Lynn.
Eventually selling for $831,000, the young couple who tried to slow the bidding down by bidding $1,000 when the bid was at $560,000, were presumably left to ponder another weekend of open homes.