All posts by Jason

ASB Eases Home Loan Lending Criteria

In the past couple of weeks we have noticed senior bank staff in the newspapers indicating a willingness to lend. Further evidence of this is seen today with ASB easing its home loan lending criteria. Namely they have reduced the internal interest rate used to calculate a clients home loan servicing ability, or in other words, affordability. This has a direct effect on the calculation that the bank is willing to lend you based on your income level.

Effectively your income will now support a larger loan amount today with the ASB than it did yesterday.  The bank had raised this interest rate back in May 2009 as a result of the general nervousness of that time, and its reduction today, is further evidence of home loan lending criteria improving.

Enduring Powers Of Attorney

One thing that we find a lot of folk don’t have when sitting down discussing mortgage finance to assist with house purchases, are Enduring Powers of Attorney.

Now, this isn’t legal advice, you have a lawyer for that, but we thought we would provide a brief overview.

An Enduring Power of Attorney, or EPA as it’s sometimes called, acts a bit like that computer back up that we all do regularly (did someone say “Yeah Right”) :-).

Basically it lets you appoint someone else to take care of your affairs, in case you aren’t able to, and is only used if and when it is necessary. And like that computer back up, they are very very handy when they are required. Maybe you’re overseas on that long- dreamed-of trip when something unexpected back home crops up. Or, not so good, you get sick or have an accident, which could mean you can’t cope with the complexities of signing or understanding documentation.

Who will make the required decisions, or sign the necessary papers for you? Please don’t rely on the widely held belief that your “next of kin” can do it. This is not the case – you need to have a properly appointed Attorney.

There are two sorts of Enduring Power of Attorney. One in respect of Property – that means everything you own, not just real estate; and one in respect of Personal Care and Welfare, which covers decisions on hospitalization and so on. So you could imagine that these appointments can get more important the older you are.

Of course, you’ll need to give some thought as to who might be the best person to appoint, (perhaps someone younger than you?) – Depending on your circumstances. It might be a family member, a friend, or your solicitor or accountant. You could appoint say, 2 people for property, who could act either separately – one or the other, or both together – so as to give you more security and peace of mind. However, you can only appoint one person to act at a time for care and welfare.

A Power of Attorney stops operating when you die – that’s when you’re Will kicks in – but we might talk about that another time!

Enduring Powers of Attorney are standard legal documents, so you’ll need to get in touch with your lawyer if you’d like to set them up. Most of you that we will be seeing will be visiting your lawyer anyway for signing of mortgage and land transfer documents so why not attend to this at the same time. Give it some thought, eh?

Official Cash Rate Unchanged at April Meeting

The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5 percent.Reserve Bank Governor Alan Bollard said: “The outlook for the New Zealand economy remains very uncertain following February’s Christchurch earthquake.”

And he followed that up with, “Given the outlook for core inflation and continued economic disruption stemming from the earthquakes, the current level of the OCR is likely to remain appropriate for some time.”

The effect is that home loan floating interest rates are likely to remain as they are for some time. And your guess is as good as ours when it comes to deciphering exactly how long “some time” is 🙂

In an historic first time ever event, Ben Bernanke the U.S Federal Reserve Chairman, provided a question and answer session overnight after his meeting. In the session he repeated earlier statements that the Fed would not be raising interest rates for an “extended period”.

On balance then, given what feels like a series of problems around the world currently, and a New Zealand economy that feels sluggish at best, we don’t see alot of reason to move from home loan floating interest rates. We reiterate our view however that if possible one should be trying to pay more than the minimum monthly repayment required on your home loan while the home loan floating interest rate is so low. Any extra repayment comes straight off the principle (the amount you owe) of the loan, leading to interest cost savings.