Archive for May, 2011
I have been preparing this week for the NZ Wealth Mentor Property Masterclass Event is on this weekend at our Newmarket, central Auckland offices. It will be another great event, with very useful information for those looking to invest in property and those with property looking for further direction and wanting to accelerate their path towards financial freedom.
Residential Loan Expiry Dates at 31 March 2011
This is not a graph of NZ political parties in Parliament. The excel doughnut chart I used to plot the data from the Reserve Bank gave me these colours as a default. For the first time in a great many years there is a higher value of residential loans ($84.6 billion) on floating rates, than residential loans ($83.1 billion) on fixed rates.
There were only $35.9 billion of residential floating loans 2 years earlier in March 2009, and fixed interest loans with greater than two years to expire amount to less than $10 billion. This will please the Reserve Bank hugely as the OCR will have much faster effect when it eventually rises (which in my opinion will not happen within at least the next 6 months). The OCR is exceptionally strongly correlated to floating rates and short term (say < 18 months) interest rates.
Today’s HorizonPoll conducted between Thursday and Friday was extremely interesting. It showed the public’s approval of Dr Don Brash’s taking over the leadership of the ACT Party and his resignation from the National Party and interestingly showed support for Hone Harawira’s soon to be registered Mana party, who have polled slightly higher than the Maori Party. ACT have taken a number of votes back of the National Party and have got over the 5% threshold to guarantee seats in Parliament for the first time in this electoral term, meaning they would not have to win a seat to get into Parliament as a political party.
ACT New Zealand 5.3%
Green Party 9.8%
Jim Anderton’s Progressive Party 0.6%
Labour Party 26.9%
Mana Party 2.3%
Maori Party 2.1%
National Party 36.6%
New Zealand First Party 6.8%
United Future 0.9%
Other party 1.9%
Don’t know 4.9%
These results have a margin of error of 2.3% at a 95% confidence level, so they are statistically very relevant. This means that the National + Act + Maori Party + United Future coalition has 44.9% support. The Labour + Green + New Zealand First coalition would have 43.5% support. As a result the 4.9% of voters will have a decisive outcome in addition to the other parties (Mana party and Jim Anderton Progressive party). The Maori party cannot be guaranteed to be in Government either as there is undoubtedly a bit of a backlash amongst Maori for being in Government with the National party.
This election is shaping up to be an extremely interesting one, and it is by no means a foregone conclusion.
Whilst the OCR was held at 2.50% by the Reserve Bank Governor, Dr Alan Bollard as was widely anticipated, the accompanying comments indicate that this rate will not change for quite some time (most economists are predicting early in 2012 for the OCR to rise, with a few picking a rise late this year). The truth is that it is simply too far out in this turbulent economic climate to predict this correctly.
It’s been an interesting last two weeks in the finance world, with a number of changes happening. We have seen credit criteria relax slightly, heard that the OCR will stay at 2.50% for some time after hearing the announcement from the Reserve Bank Governor, and seen some interest rate cuts and discounts.
Sovereign have become main bank competitive finally with a 0.15% drop in fixed interest rates.
TSB Bank have an excellent 1 year fixed interest rate at present of 5.50% which is lower than all main banks floating interest rates. This is a move designed to grab market share for them. I think this will prove popular, although they don’t have the same distribution channels as their larger competitors.
TSB also have a great 2 year interest rate at 6.28%, but I know clients have been able to match or beat the TSB interest rates with ANZ bank. So remember to ask your bank to lower their interest rates. There is hot competition for market share, so no doubt other banks will be like ANZ and give sharp pricing for those with 80% or lower Loan to Value Ratios (LVR).
Westpac have for a long-time been lending at 95% LVR (lesser of purchase price and Registered Valuation) for new home-owners on very good incomes. Now they are offering to refinance those on very good incomes 95% to refinance away from other lenders.
We have got a client who is a chartered accountant who have negotiated the floating rate of 5.00% with Westpac from their NZICA (NZ Institute of Chartered Accountants) discount. That’s a fantastic rate, and beats package discounts available to most other larger employers and associations (eg. NZ Police, NZ Defence Force, Air New Zealand etc). The only rate discount I have heard that is better is a senior staff member on 4.75% floating on their investment property with ASB.
My favourite floating rate product is BNZ’s TotalMoney. This is on the very low 5.59% interest rate and is a floating home loan with offsetting to help you save. Here’s what else you can do with BNZ’s fantastic TotalMoney product:
- Offset the balances of your cheque and savings accounts against your home loan which could reduce your effective interest rate – potentially taking years off your home loan
- You can make lump-sum repayments without worrying about early repayment charges
