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Latest Economic Commentary & Property Report

May 2014

We cover:

·        The Housing Market

·        LVR Lending Restrictions

·        The Official Cash Rate (OCR) and commentary

·        Fix or Float your mortgage

The Housing Market

April evidenced a cooling in the housing market and noticeably more properties are passed in at auction with negotiations happening after.  There are less buyers, who are now having more of a say in what they buy.  The Asian input is often into sub-divisible land or in anticipation of Auckland’s proposed Unitary Plan and/or school zones – Asians will typically pay 10% more than rival ‘all-comer’ bidders.  It is therefore concentrated into certain areas (or school zones) where they have a noticeable presence – many of them will be citizens..

While Auckland prices have seen growth outstripping new home buyer’s ability to get themselves into housing, we see an increase in the percentage of renters, and possibly New Zealand through Auckland is showing the first signs of home ownership being unreachable – as in many other countries.

The countryside is lagging behind Auckland and Christchurch in growth.  Outside of these the fastest growing areas are Pukekohe and Hamilton.

LVR Lending Restrictions

All banks are restricted to lending no more than90% of the house value.  Sometimes we may be able to get an extra 5% on second mortgage but definitely restricted to high income earners and professional people.  These LVR restrictions could be removed at the end of the year but don’t hang your hat on it.

90% finance for a new build (not newly completed) is no problem.

80% or below is generally not a problem provided serviceability is evident.

Note in some cases we are able to obtain personal loan finance to help with the deposit but banks want to see 5% genuine savings.

The Official Cash Rate (OCR)

Key Dates:  

25/7/2014   OCR Announcement

12/9/2014   Monetary Policy Statement & OCR

31/10/2014  OCR Announcement

12/12/2014  Monetary Policy Statement & OCR.

Commentary – The tightening cycle has started with the first OCR change in 3 years of 0.25%+ announced on 13/3/14.  There are signs of increased productivity lead by our manufacturing sector.  This gathering momentum (still early days) is creating inflationary pressures and hence the recent rise in the OCR.  Currently the anticipation is further tightening by raising the OCR another 2% over the next 2 years.  That would put floating rates in the vicinity of 7.5%-8.0%.  There are still downside risks and like the weather forecast, rates don’t always perform as initially forecast.

 ‘Rate Watch’, delivered direct to your ‘in-box’, will help give you advance notice of expected or pending changes. This  commentary - available by emailing ratewatch@mortgagehelp.co.nz - is comprehensive and should be requested.  It is also ongoing. 

Fix or Float your Mortgage

We suggest mixing fixed rates (2 & 3 years) with floating to spread the risk.  However every situation is different and we suggest you contact us to help you with your own position – you don’t need to be an existing client.

- Basic Philosophy.  Fix long when rates are low; fix short or float when rates are high.  Believe me, that the temptations because of bank ‘specialist’ offers will often be the opposite.  Remember fixing gives you certainty and sometimes there is a tradeoff with cost.

Our Bible – Exceptional service… defined as thoughtful, proactive, knowledgeable and timely communication. 

Contact us at info@mortgagehelp.co.nz for individual consideration.  You deserve it.

Please don't hesitate to email or phone us if you are contemplating buying a property or properties whether for yourself or for investment. We will look at your situation now and what you want to achieve in the future, so that we can structure your borrowing with the right package from the right lender for you. All this is backed by our Unique Performance Guarantee.

Disclaimer:  This information is intended for general information only and IFL Associates Ltd, Mortgagehelp.co.nz Ltd or the author accept no responsibility for any action or interpretation taken as a result of using this information.  You do have the opportunity to put in place a plan authored by ourselves tailored to your individual situation.

 

 

 


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