All posts by Jason

Official Cash Rate Duly Cut

The Official Cash Rate was duly cut last week, as was widely expected, by 0.50%. Home loan floating interest rates have followed suit. See the Reserve Banks Statement here.

The permutations of the move are still flowing through the home loan interest rate market.

Westpac Bank has followed up their cuts to home loan fixed interest rates from two weeks ago, with further cuts this morning. 6 months fixed now sits at 5.59%, pretty cheap money by New Zealand standards.

As an aside, we are working with some USA based clients at present, and one does a double take when one see’s a revolving credit facility on a rate of 2.74%.

Returning to life in New Zealand, all the major lenders appear to be back in the 95% lending market. One can but assume that they are of the belief that the property market is stable.

The median number of days taken to sell a property lengthened out to 58 in February. Compared with February last year, sales volumes were down 4.3%.

Home Loan Fixed Interest Rates Decline

The ripples of the awful Christchurch earthquake are beginning to be felt in the Home Loan Fixed Interest Rate market.  ANZ and National Bank have cut the majority of their Home Loan Fixed Interest Rates,  with their 1 year fixed rate now sitting at 5.95%.

Our expectation is that the other major banks will follow suit to some extent shortly. And indeed, as i type, Sovereign has also cut their home loan fixed interest rates.

90 Day Bank Bills have also declined to around 2.86% from in the region of 3.18%.  This is telling you that “the market” is expecting a cut in the Official Cash Rate at the next Reserve Bank Announcement on the 10th of March. These 2 indicators are the major influence on your home loan floating interest rate and hence, a decline in this could also be on the cards.

If you have recently purchased a property and have yet to settle the transaction or have a home loan coming off its fixed interest rate in the near future, may we suggest you hold off making an interest rate decision until after the Reserve Bank Announcement.  Everyone’s circumstances are different but waiting may well lead to a clearer understanding of the Reserve Banks approach to handling the economy in response to the crisis.(and possible flow on’s to home loan interest rates)

These recent actions provide one example, highlighted in our last blog, of why we would have been in no hurry to jump lenders for Kiwibanks (or any other Bank’s) recently advertised home loan “special” 1 year fixed interest rate of 6.15%, which lasted for 3 weeks. The Bank has recently commented that the promotion was “extremely successful”.

Successful for whom?

Merry Christmas

Merry Christmas to all.  Thank you to our valued clients, our lenders, our insurers, our Kiwisaver suppliers.  And a big thanks to the support staff that make things happen when we need them too.

(and thanks to Patrick for putting up with my oft ravings).

Enjoy and we look forward to seeing you in the New Year.

May your break include snapper on your lines, offshores for your waves, and birdies on your greens.

Cheers from the team at Oregon. 😆

Official Cash Rate Unchanged

The Reserve Bank left the Official Cash Rate unchanged today for the 3rd time in as many meetings.

Providing some good news for those with home loans the Reserve Bank Governor Alan Bollard said: “Interest rates are now projected to rise to a more limited extent over the next two years than signalled in the September Statement.”

But he also added a wee warning..”Household spending also remains weak, with household credit still flat and housing market activity slowing further. House prices may decline a little further in the near term.”

In keeping with a feeling of subdued activity we see Barfoot & Thompson released their house sales figures for November.  Sales for November 2010 were 668 properties against 862 properties in November 2009.

Official Cash Rate Unchanged

As expected the Reserve Bank left the official cash rate unchanged this morning.  As a result we would expect little movement in home loan interest rates.

The Governor commented..

“Domestically, recent data has turned out weaker than projected. Continued household caution has seen consumer spending and housing market activity remain muted, and many firms have become less optimistic about their future prospects. However, continued high export prices, along with reconstruction and repairs in Canterbury, will support activity over the coming year.”

We have seen the slower housing market activity 1st hand, at the last couple of auctions attended recently the auctioneer was practically on her knee’s begging the audience to bid.

The word from a long standing real estate agent yesterday was that the only sellers currently are those going through a relationship breakup or those facing severe financial difficulties.

Enjoy the rest of your week and go the Kiwi’s.

Official Cash Rate Unchanged

The Official Cash rate was left unchanged last week at 3%.  The Reserve Bank Governor noted that the economic outlook had weakened since his last statement in June.  As a result he also indicated that the pace and extent of future rises may be moderated. We remain pretty comfortable with sitting on a floating interest rate as long as it suits individual circumstances.

The banks will be rubbing their hands with glee over the collapse of South Canterbury Finance.  One could safely assume that a fair chunk of the $1.7 billion cheque that is being written out will find its way to the banks on term deposit.  An amount of stimulus to the economy could also ensue as we wouldn’t be surprised to see a few taking the opportunity to upgrade the car, or replace the wonky freezer, and put the rest on term deposit.

In a further easing of home loan credit criteria, ASB Bank recently announced it was back in the home loan lending market up to 95%. They had been camped at the 80% mark since October 2008, so the move is pretty significant.

Have a great week. 😛

Official Cash Rate Raised to 3%

Today the Official Cash Rate was raised to 3%.  The Reserve Bank Governor noted..

“In New Zealand, domestic demand is subdued. Households are cautious, with retail spending growing only modestly, housing turnover in decline and household credit growth weak. While this caution has been evident for some time, the recent slowing in net immigration will act to further dampen consumer spending. Business investment remains very low, with corporate lending continuing to be subdued.”

Slowing net immigration is also likely to have negative affect on the housing market.

He also noted that the pace and extent of further raises may be more moderate than previously indicated.

This means there could be a pause in OCR raises rather than straight line upward raises.

Generally speaking we are, and have been for some time, pretty comfortable sitting either on a floating interest rate or simply rolling over a 6 month fixed interest rate.

Kiwisaver – Get Your Full Entitlement

We were recently advised by one of our Kiwisaver providers that in the 2009 year the average amount of Member Tax Credits received per person was $600.

Kiwisaver members are entitled to Member Tax Credits, the sum that the Government contributes, of $1,042 per year.

Therefore many have left a chunk of the benefits on the table.

We urge all members, excluding those under the age of 18, to keep an eye on their level of contributions and if you haven’t made a minimum contribution of $1,042 during the year then top up your account to get to this level. This means the government is obliged to top up their contribution to the same level.

Its about as close to free money as you can get unless you’ve developed some form of fertiliser that makes it grow on trees.

Its as easy as logging online with your bank and transferring the funds to the IRD, you’ll need your IRD number, or make a deposit at Westpac.

Get the funds in before the 30th of June. 😳