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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.

The AMS Property Gazette - July

Published by Scott Miller on Sunday, July 11, 2010 in

The Budget

The budget has come and gone with little to no affect on existing investing strategies, and for those looking to purchase a family home for themselves nothing has changed at all. The biggest change came with the dismantling of the ability to claim depreciation from the building. Experts in this field have placed a weekly cost to the vendor of investment property to be around $30 - $40 pw for new houses and $20 - $30 for existing or secondhand houses. Of course depreciation is still available on chattels and it is expected the chattel valuers are going to become very popular and extremely busy over the coming years to help compensate the losses mentioned above.

LAQC's

Like above very little has changed here. As long as the property held within an LAQC (Loss Attributing Qualifying Company) is running at a loss ( When the mortgage, rates, insurance, and maintenance costs are higher than the rent received) and you are personally guaranteeing the loan against the property(s), nothing has changed in distributing those losses against your personal income.

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 10/7/10.

Variable

6.00%

6 Month Fixed

6.10%

1 Year Fixed

6.45%

2 Year Fixed

7.00%

3 Year Fixed

7.30%

5 Year Fixed

7.75%

The easy decisions are over! After an almost continuous easing of interest rates over the past 2 years the worm has finally turned and we are now on the upward spiral.

Up until now it has been relatively easy to read the interest rate market and the majority of consumers have slowly unwound their fixed rates to enjoy the historic interest rate lows of the past year.

Now however, we are faced with the difficult decision of whether to lock interest rates in or stay floating.

Further confusing the matter, recent economic data does suggest that while interest rates will certainly continue to rise it may not be as fast as many first thought.

Consumers continue to look to get their household balance sheet in order, despite a recent spike in spending largely due to people looking to make any 'big ticket' item purchases pre the increase in GST in October.

Our appetite for borrowing remains subdued as where possible consumers look to pay down debt as opposed to increase it.

While this augers well for the future it does contribute to the sluggish recovery the economy is making.

This is further evidenced by the continual slow progress of the housing market which remains soft as the value of residential sections continue to drop, now down by 17% from their peak two years ago. Additionally, migration continues to slow from last years healthy increase of over 20,000.00, currently 2010 sees us on target to only increase by around 8,000 people which could yet be an optimistic figure as the buoyant Australian labour market continues to hold appeal for some Kiwis.

Interestingly, we have seen a substantial easing in long term rates from the major banks over the past week with decreases of as much as 0.65% off five year fixed rates and up to 0.45% off three year rates & two year rates down by around 0.30%. This move certainly sees the interest rate curve flatten substantially and provides far more appeal to the two & three year rate options which are now less than 1% - 1.25% higher than the low variable rate.

Currently a split on variable and two or three year money looks pretty appealing although if you are concerned about rate rises now may be a good time to lock in.

As always please do not hesitate to contact me if I can assist you in finding ways to streamline your mortgage costs. This ranges from purchasing property right through to loan roll overs and top-ups.

Kind regards

Scott Miller

P.s I have started making a few short video's to help with better understanding bank policies, what interest rates are doing and a brief look into some of the different strategies available when looking to invest. Please click on the link below to have a look.



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