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Mortgage Advice Blog

Get the latest news and tips about mortgage finance and the property market. Scott Miller, mortgage broker from Advanced Mortgage Solutions comments on housing and lending.

~Property news for July

Published by Scott Miller on Tuesday, July 28, 2009 in
Blog

Welcome to my newsletter for July 2009.

Internationally:

 There has been a lot of positive news out in the market at the moment. World stock exchanges have had 10%+ rallies over the last two weeks, noticeably the Dow Jones sneaking past the imaginary 9000 point barrier and the NZX 50 passing the 3000 point mark. This is good news and long may it continue. I suggested in my May commentary that if the northern hemisphere had a good long summer with positive financial news that it would filter down to the New Zealand economy, and it certainly has been positive so far.

Locally:

 The OCR announcement this Thursday is expected to bring up no surprises with most economist’s predicting a hold on the cash rate at 2.5%. What does this mean? Well for the short term rates (6 months and 1 year), I expect there will be very little change if the rates stay the same. If rates do fall I would imagine only a small flow-on from the lenders would take place. The promised bank war on rates has not eventuated, although don’t count this out from happening in the near future as competition for customer retention is heating up. There is continued pressure for longer term rates (18 months, 2, 3, 4, and 5 year rates) to increase, albeit slowly. If your home loan(s) is coming up for renewal within the next 60 days please contact me here and I will approach your lender to ascertain any potential discounts available for you.

 On another local matter there is good news for first home buyers with little or no deposit.

 The following is an update on the current Welcome Home Loan product.

“Welcome Home” loan lending limits look set to increase

Lending limits for “Welcome Home” loans for first home buyers look set to increase next month, opening the scheme up to low-income home-buyers in parts of New Zealand for the first time in several years. Housing Minister Phil Heatley has told Parliament’s social services select committee that the current $280,000 loan limit for the scheme could be raised by the Cabinet on August 3 to between $320,000 and $350,000.A spokesman for Housing Minister Phil Heatley has said there were no plans to change the income limit of $85,000 for a household of one or two people, but it was clear that the loan limit had fallen behind property values, especially in Auckland.

NZ Housing Foundation director Brian Donnelly said the new loan limit could make the scheme useful in Auckland if it was extended to cover shared equity arrangements where first home buyers buy only 75 or 80 per cent of the value of a home, with the rest owned by a joint owner such as the Housing Foundation.

Welcome Home loans:

 Loans up to $280,000 for first home buyers.

  • Household income must be under $85,000 for one or two borrowers, or $120,000 for three or more borrowers.
  • 15 per cent deposit required for loans above $200,000.
  • Proposed loan limit increase to $320,000 or $350,000 would finance homes worth up to $376,470 or $411,765 if borrowers can find the required deposits.

This product is available through Advanced Mortgage Solutions and if you would like more information please click Here.

Tip of the month:

House prices seem to have found their low point.

If you are in a position to hold onto your current property portfolio without it causing an undue financial strain then do so. Don’t misunderstand me; if you have a particular property that is not behaving itself by all means sell it. However with net migration breaking all sorts of records, the economy being as bad as it has for so long, and continued historically low interest rates house prices are going to make a comeback. The time where capital growth was the reason for owning property although still a while off, is returning, and from the bottom it can only go up.

Please click here to return to AMS’s home page

~Interest rates

Published by Scott Miller on Monday, July 06, 2009 in
Blog

Interest Rate Outlook

Current Interest Rates
Rates offered are the best of standard, carded interest rates available and do not reflect any discounts your Advisor may be able to obtain for your client. Rates correct as at 03/07/09.
Variable 6.30%
6 Month Fixed 5.39%
1 Year Fixed 5.49%
2 Year Fixed 6.20%
3 Year Fixed 6.89%
5 Year Fixed 7.90%

The economy is stabilising, and this should see an end to the easing of interest rates much further, provided we do not see any more turmoil in overseas markets.

We are seeing a continuing strengthening of net migration into NZ with another month of in excess of 2,000 more people into our beautiful country, on an annual basis our population has increased by more than 9,000 which is more than double a year ago, this is predominantly being driven by a sharp decline in the number of Kiwi’s jumping the ‘ditch’ which is now down to record lows not seen since 2006. The strong net migration together with strong housing data supports the theory that the easing of interest rates has almost finished.

Much improved household affordability is being driven by the lower interest rates we now enjoy and the average number of days to sell a house is now down to 41 which is just a touch over the historical average of 39 days and seasonally adjusted sales last month were over 5,700 more than 50% above the trough in November 2008. There is clearly a stock shortage in Real Estate with a lot of people preferring to sit tight in the current climate due to concerns around employment prospects and the continuing conservative approach to lending from banks who all have liquidity concerns and are in a massive arm wrestle for term deposits.

The Reserve Bank has reiterated that it expects to keep the Official Cash Rate low right through to late 2010 and while business confidence has been restored the economy is still hampered by the strengthening of the kiwi dollar due to a continuing depressed global environment, which is undermining the rural and export sectors.

Mortgage rates continue to be influenced by contrasting forces, at one end of the scale you have continued upward pressure on long term rates (3-5 year) due to upward pressure on term deposit rates as banks scramble for term deposits. At the other end of the scale we see the message being reinforced that short term rates will be held low for at least the next 18 months. These forces are seeing a lot of tension in the mortgage market with consumers confused or contrasting in their opinions. Our current strategy still remains unchanged though, be patient and take advantage of the low 6 month or 1 year fixed rates with over 2% difference to 5 year rates, the other option is to consider a hybrid of the two.

What’s Hot
We have been able to extend our very popular 95% LVR product out to refinance clients now. Previously restricted solely for purchasers, we can report many happy clients last month were able to consolidate their debts into one loan, saving them thousands of dollars in interest and reducing their monthly commitments-Help your clients, refer them to us!

My property commentary

Published by Scott Miller on Tuesday, May 26, 2009 in

Well summer has definitely gone and winter has arrived, but despite the weathers best efforts there is plenty happening in the property market.

First I would like to go over some of the thought I have on where the property market is going.

I believe that the seasonal changes we are experiencing could not have come at a better time. In the last three months of summer we saw a rebound in the property market. Sales numbers were up, days taken to sell were down, and in April we even saw a small increase in the median houses price throughout New Zealand.

Traditionally winter always brings a lull to the market. Daylight viewing hours are less, the cold inhospitable weather lessens people enthusiasm for house hunting, and properties don’t look so good with leafless tress and muddy grounds.

BUT THAT’S IN NEW ZEALAND!

It pays to remember that in the big scheme of things New Zealand really is only a cork floating on the sea of international change, and we as a country don’t have that much financial clout. As New Zealand moves deeper into winter the northern hemisphere arrives into their summer and all the nice things about life returns to those who live north of the equator. As far as the weather is concerned the good times are back. (I was speaking with a client in London yesterday and it was 25 degrees, his kids were outside playing in the garden, happy days)

So the good feelings are back - but what about the global recession, how’s that coming along?

Well financially, stock and monetary markets have been making a slow but steady recovery, making up some of the lost ground they have experienced over the last year or so. Wall Street has seen a 19% increase in its markets since its lows in Dec/Jan, as have many of the European stock and monetary exchanges.

The implementation of recession busting government policies is also starting to have effect. TARP and similar schemes have gone a long way to oiling the wheels of finance, allowing companies, and individuals to lend money again. This combined with a reduction in interest rates for almost all countries has made accessible fund more affordable.

Now I am not saying that the world (or New Zealand) is out of the woods yet, but what I am leading to is that given the direction the markets and monetary policy is heading, we should be well placed to see some real change as we come into our spring. The feel good factor in the northern hemisphere coupled with rejuvenated business confidence will surely flow and bob the cork that is New Zealand. Expect to see unemployment reduce, net migration continue to increase, and house prices slowly rise as our summer takes hold.

As I mentioned at the start, personally the timing of the seasons

could not be better.

Tip of the Month:

Please be aware the new 95% product is going well with over 2/3being approved. If you find yourself looking to make that next purchase or simply want to know how you are placed to move forward please don’t hesitate to contact me.

Below I have added the latest commentary from the NBNZ.

Please read on as it makes great reading.

The month in review

Lower mortgage rates have given the property market a shot in the arm, although it has the feel of a statistical rebound from very low levels. The number of new homes being built remains weak. The Reserve Bank has committed to keeping rates low until the latter part of 2010, which will provide borrowers with a greater degree of certainty.

» Building Consents – March. Residential building consents remain very weak. Following an 11.7 percent increase in February, consent issuance fell 4.6 percent in March (-30 percent annually). Stripping out volatile apartment issuance, consents fell 1.3 percent following a 0.2 percent increase last month. The level remains near historical lows.

» Net Migration – March. NZ gained a net 1,720 people in the month of March, taking the annual gain to 7,482 (compared to 4,678 a year ago). In the March quarter, net migration was running at an annualised rate of 16,520 people, equivalent to 0.4 percent of the population.

» Mortgage Lending – March. Household credit growth rose by only 0.1  percent - despite all that frenzied mortgage fixing and increased housing market activity.

» REINZ housing data – April. Nationwide house sales recorded an impressive 19.6 percent seasonally adjusted increase in April, and are now up 39 percent on a year ago. The median length of time to sell a house improved to 44 days in seasonally adjusted terms in the month. This is down from 48 days in March and a peak of 57 days in July last year, although it remains slightly above the historical average of 39 days. House prices also continue to surprise, although composition issues with the REINZ data means that some caution should be taken. Nevertheless, the median house price rose $5000 in the month to $340,000 and is only down 1.4 percent on a year ago.

» RBNZ April OCR Review. The RBNZ delivered a clear message in its latest assessment of the economic situation by cutting the Official Cash rate (OCR) by 50 basis points and committing to keeping rates low until late 2010. In so far as central bank communication is concerned, the message was clear cut: if you are a borrower, don’t panic and rush to fix

for a long-term.

» Household Labour Force – March. In seasonally adjusted terms, employment fell by 1.1 percent in the March quarter – the biggest quarterly contraction since the March 1989 quarter. However, volatility in the employment growth measure of late almost makes the quarter-on-quarter movements redundant. We instead prefer to focus on the more stable unemployment rate, and while it rose 0.3 percentage points to 5.0 percent, judging by leading indicators it is set to rise further.

Assessment

The month saw further signs of encouragement in so far as housing related indicators are concerned. However, the level of activity still remains well down on the peak. Recovering house sales look to be leading the way and should start to flow into building consent figures in H2 2009 (which having hit 1960’s lows is simply unsustainable relative to natural population and

migration growth). But going forward we need to differentiate between the change and the base. The change is welcome but recovery means climbing out of a very deep hole. The big uncertainties are impetus from migration versus fewer jobs.


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