Blog

Please find June's Property Gazette below. As always I have made comment on relevant market and policy informtion to help you keep up to date. I appreciate the monthly feed back and questions that arise from each newsletter and I'm sure this will be no different.

I would also like to take this opportunity to welcome all those clients who have joined the AMS team from Carolyn Dreaver's ODL Mortgages. Carolyn has decided to leave the mortgage industry and we wish her all the best of luck with her future business ventures.
 

Current Interest Rates as at 1 June 2011  

Variable              5.40%
6 Month Fixed         5.59%
1 Year Fixed          5.55%
2 Year Fixed          6.20%
3 Year Fixed          6.70%
4 Year fixed          7.30%
5 Year Fixed          7.45%

 
Interest Rate Outlook

You can be excused for missing the release of the biggest ‘no news’ budget in recent history, it just sort of came and went with very little fanfare and the underlying message continued that we have to keep our spending to a minimum both as consumers and from a government perspective with all focus rightly looking forward to the rebuild of Christchurch.

A tight budget means that fiscal policy will keep growth in check for the year ahead which will take some pressure off the Reserve Bank in terms of how high they would need to push interest rates, which is of course a good thing.

House sales figures continued to lift through April & May from their late 2010 trough however still remain around a third below historical averages. Encouragingly though building consents are on the rise with a new motivation arising to ‘get it done now’ before construction sector shortages emerge across the country use to the Christchurch rebuild. This increased activity together with a second successive yearly record payout on the dairy sector should start to give the economy a nice little boost, the reality is farmers will have to start spending or be faced with a sizeable tax bill & we all know how much cockies like paying tax!

All of the above is leading to a pretty positive outlook with confidence quite high in business and investment sectors, this if course leads us to our current recommended borrowing strategy.

With more than 2% variance between long term fixed rates of 5 years it is difficult to see value in longer term rates. However, we have no doubt that we will see rate increases in the last quarter of this year and as such feel that the shorter term fixed rates probably offer the best value as there is little differential between variable and 1 year or 18 month fixed rates. For those a little more risk adverse we suggest the 2 year rate still offers good value @ less than 1% above current variable rates, as long as you realise you pay a small premium now to buy some security.        
 
What’s Hot

Competition really is a beautiful thing and now the Banks credit appetite has returned they are returning to their old tricks of sweetheart deals on interest rates and professional fee contributions. We are seeing some very sharp pricing now as the banks compete for our clients.
 
Deal of the Month

Last month we funded a gentleman into his first home, he had enquired about using Kiwi Saver as deposit on his home and was very pleasantly surprised to learn that not only could he use his contributions but his employers and qualify for a government subsidy, totalling $20,000.00 he could put toward his first home making it all achievable - Call us we deliver!

   Dr Bollards announcement of the official cash rate (OCR) on 16th September came as no surprise. It had been well mooted coming up to the announcement that the OCR would remain unchanged at 3%. What did come as more of a surprise was the tone of his message around where he saw the OCR’s movements in the near future. Some could argue that he had made a complete U-turn on earlier comments he had made. It was only at the July (29^th) OCR announcement that it was indicated for the foreseeable future the OCR would rise .25% every 3 out of 4 announcements until the OCR reached a level of around 5.75% - 6.25% where it would stop for a period of time before slowly dropping away again. Now it appears the OCR will not rise again this year (with two announcements left this year: 28^th October & 9 December), and will only slowly rise throughout next year stopping at a high point of around 4.5% - 4.75% in the middle of 2012. The reasons given for this change in forecasting was mainly put down to two things 1) A slower than expected improvement in the world’s economy. 2) A slower underlying improvement of the New Zealand export lead recovery.

Business finance has been on the improve for almost a year now. By the end of 2009 we started to see the taps slowly turned on after 18 months of them being firmly shut off. The momentum started with increases in overdrafts and acceptances of top-ups, and then gained further ground with residential purchases off full financials, and has now come almost full circle with finance being found to purchase of existing businesses or to start capital up new ventures. Levels of ‘easy’ money are some way off the crazy days of 2007 and early 2008, but in the same breath are far removed from the dark days of late 2008 and 2009. Now if a deal stacks up it has a good chance of being approved whereas 18 months ago it could have been the deal of the century and declined before it was even looked at.