Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE/LOAN RATE CHANGES
No changes to report today.
TERM DEPOSIT/SAVINGS RATE CHANGES
TSB (A-) raised all its 2-5 year TD rates, now offering rates at the upper end compared with its bank rivals. Liberty Financial (BBB-) raised its rate offers across the board, with their one year offer at 6.90%.
LACKLUSTER ...
Housing lending mortgage books rose by +$968 mln (+0.3%) in August, which was its second largest monthly increase in 2023. But the annual growth rate remained unchanged at +3.0% from a year ago, its lowest year-on-year expansion since October 2012. Neither lending for business, nor lending to the rural economy are out of the growth doldrums. If any sector is attracting more lending, it is the horticulture sector.
... BUT FACING REPRICING RISK
Almost a quarter (24%) of all owner-occupier mortgages ($61.6 bln) will reprice in the next 3 months, but $26.2 bln of that is already on floating rates. $92.5 bln (36.1%) will reprice within 180 days. $160.2 bln (62.6%) will reprice within a year. That is a lot of pain to yet flow through to household budgets. For investors, it is an even higher proportion.
HOUSEHOLDS FLOOD BACK TO TDs
Total deposits in the banking system hit $440 bln for the first time in August 2023, up +2.7% from a year ago. $235.9 bln of these were household deposits which were up +5.4% in a year. Of these, $120.5 bln were term deposits (also a new record high) which were up a remarkable +25.0% or +$24.1 bln in one year. -$9.2 bln of that came out of household transaction accounts, -$2.9 bln came out of household savings accounts.
STILL NEGATIVE, BUT ...
The latest ANZ-Roy Morgan survey of consumer sentiment doesn't find much spring in the step of households but it does find some, and in the most surprising places.
STILL RETREATING
Sales of farms and lifestyle blocks continue to slide according to REINZ August data.
MORE ELECTION POLICY RELEASED
There were policy releases by political parties today. National released its Forestry policy and their Police policy. Labour released more Health policies. And NZ First also released Law & Order, and Mental Health policies. You can find them all, compared, here.
MANAGING LIQUIDITY RISKS
Managing liquidity risk is on the mind of regulator, the FMA. It is especially timely at present when yields are rising, depressing asset values. Investor harm occurs when there are significant fund redemption requests. Poor liquidity risk management in those circumstances could force an investment manager to sell less liquid assets, like some types of property investment, for whatever price they can get, which impacts the return of all fund investors. Or, the manager may have to sell a lot of more liquid assets – like large companies – which suits the withdrawing investors but raises the risk of the fund, making it unfair to the remaining investors. Effective liquidity risk management will also reduce the risk of a liquidity crisis in one fund spreading to other managed funds. The FMA has issued proposed guidance on how fund managers should behave with fund structuring.
RISING FASTER
In Japan, August retail sales rose +7% from a year earlier, unchanged from an upwardly revised July result. This August increase was much higher than the consensus forecast for +6.6% growth and was the fastest pace since February. Consumption continues to recover solidly after the pandemic-induced retreat. Japan has CPI inflation at 3.2%.
DAYLIGHT SAVING TO START IN PARTS OF AUSTRALIA
NSW and Victoria, South Australia, Tasmania and the ACT will start summer time this weekend and we will revert to being two hours ahead of them again. Northern Territory, Queensland and Western Australia do not observe daylight saving.
ONLY THE CCP COULD DO THIS !
China's Mid-Autumn Festival has started and they will be on holiday from today until the end of next week. This year, the National Day holiday spans from September 29 to October 6, overlapping with the Mid-Autumn Festival. To partially offset the seven consecutive days of the National Day holiday, Saturday, October 7 and Sunday, October 8, have been designated as official workdays, resulting in a 7-day working week. But Hong Kong will only be closed for National Day, on Monday, October 2, 2023.
SWAPS FIRM
Wholesale swap rates are probably moving up again today. But the real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is also up +1 bp at 5.74% and now +24 bps above the OCR. The Australian 10 year bond yield is up +4 bps from yesterday to 4.51%. The China 10 year bond rate is down -2 bps at 2.71%. The NZ Government 10 year bond rate is down -1 bp to 5.33%, but still well above the earlier RBNZ fixing of 5.26% which was unchanged today. The UST 10 year yield slipped -1 bp today to 4.60% but holding most of this week's gain. Recall it started the week at 4.44%. The UST 2yr has fallen back -7 bps however, now at 5.07%.
EQUITIES MIXED & NERVOUS
The NZX50 is up +0.7% near the close today and if that holds it will be down 'only' -1.1% for the week. The ASX200 is up +0.2% in early afternoon trade and if that holds, that will also be the weekly change. However, Hong Kong has opened up +1.1% to start its Friday trade and if that holds it will limit its weekly loss to -2.1%. Shanghai is on holiday this week and will be closed all next week. Tokyo is down -0.1% to start its Friday trade, heading for a -2.1% weekly loss if that holds. The S&P500 ended its Thursday trade up +0.6% in the end. But so far this week it is down -1.0%.
GOLD DOWN AGAIN
In early Asian trade, gold is now at US$1866/oz and down another -US$7 from this time yesterday. Earlier, it closed at US$18764oz in New York. Earlier still it closed in London at US$1874/oz.
NZD UP
The Kiwi dollar is +½c higher than this time yesterday, now at 59.8 USc. Against the Aussie we are down -¼c to 92.9 AUc. Against the euro we are little-changed at 56.5 euro cents. That means the TWI-5 is now at 69.8 and up +40 bps.
BITCOIN FIRMER AGAIN
The bitcoin price is much firmer today, now at US$27,070 and up +2.4% from this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 1.8%.
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104 Comments
Practical realities of aging
- if you're older, you're going to be more risk adverse
- if you're older, you normally want shorter access to your funds
This does represent an issue ahead, with a diminishing pool of investment funds for more forward thinking investment, or things with much longer payback timeframes.
I think a WW2 anonymous, I came across it in the 1960s
Edit: Google says a US airmail pilot in 1949 https://postalmuseum.si.edu/exhibition/fad-to-fundamental-airmail-in-am…
Refinancing the clock is ticking billions going from 3% to 7% interest so your million dollar rental in Auckland rather than 30k interest now 70k at best, maybe you might be renting out for 40k a year take out monthly expenses investors will be in deep hole.A huge amount will be flooding the market soon
Why do you keep missing out the word "sustainable" when commenting on rises? A suckers market, dead cat bounce is more than likely what we are witnessing, a safe entry for FHB's is something a ways off yet. It's disturbing to see an increase in FHB low equity lending. This only puts on full display house prices are still in bubble territory and another downward shift will wipe out their equity too.
An article a few days ago suggested quite a few recent immigrants were buying homes with the government’s’First Home’ scheme. This allows people to buy a house with a 5% deposit. However they still need to meet the bank / lender’s criteria. Link to the scheme further below.
Assuming a 5% deposit, that will still typically be a massive mortgage, stress tested at over 9.5% (low equity)
What do people think? Potentially dodgy lenders not stress testing? Even a 7.5.% interest rate on a 600-700k mortgage is a lot of money.
You're making it up, current test rates aren't really common knowledge... is it advertised on their websites? I don't think I've ever seen banks publicise different test rates depending on LVR...
Accussing banks of not stress testing is rediculous also...
Start talking facts HM, terrible anti spruiking.
Ok. There’s such a thing as ‘industry chatter’, right? And my day to day work links to the development sector, which links to bank finance. Also, I didn’t ‘access’ (accuse?) banks of not stress testing. I was alluding to non-bank lenders, as my comment mentioned banks and other lenders.
Anyway, beer o’clock…
I worked for 2 banks, their test rates were roughly 2% above current floating as the first pass look. HouseMouse isn't far off in my experience...
No, they don't advertise it, but they all know within the industry what each others rates are because they all have spies in each others organisations.
Is HM a bank spy then? Lol. He's making statements like it's fact when it ain't. Banks have a range of a ways to assess an application and test rates ain't just it.
The fact of the matter is more people are getting low equity loans... he can't seem to comprehend that.
A recent article to show you you're wrong HM & Kiwi Tim, clearly all banks aren't doing 9.5%+ tests rates as you stated...
https://i.stuff.co.nz/business/132542085/banks-checking-loan-affordabil…
All the big banks have set their current test rates at 8.75%, mortgage advisers say, except Westpac, which has set its at 9.5%.
There is never any mention of different test rates for different LVRs either... again, I think you'll find test rates aren't the be all for a home loan application...
It's a disaster setup in the making! Buying at valuations/DTIs higher than before the GFC !!
Who in their right mind would buy a crappy, likely to flood newbuild in a no section, newbuild, on a West Auckland hillside (I live on a full section one) or a flat South Auckland flood plain??
The next fools or REA/Bank useful idiots - who will be winging in 6 months in the Granny Herald, how their NZ Dream turned sour. Now they saddled with 700k borrowings, asking the Gumit to bail them out (that is us!)
Quite amazing that taxpayers are already bailing out properties that got flooded. At the same time that Luxon is ranting about handouts for poor people we're continuing our generous welfarism for property. Like folk think welfare is for preserving wealth not helping the poor.
FHB house’s were 21k down in two months huge drop,the emergency rates period was around 2 years ago so most people took 2 or 3 fixed term so over next year the avalanche will happen, some who could see the bubble bursting fixed for five years I would imagine they will be sweating now as it’s going to be rates higher for longer add on inflation way over 2% target, the house price’s will start tumbling very quickly over next year adding pace to the already 20% crash.
by Nifty1 | 29th Sep 23, 4:49pm - "We keep hearing this but it's not happening"
Nifty, you clearly have not read the article above regards mortgage repricing risk still ahead. With a very much a delayed effect, the real downturn that will effect employment and asset prices is still in front of us.
Its not an obsession, its based on the timing of your posts and HW2's posts, I really do not believe that a statistical analysis of the clustering of your posts will show you in good light, I can run one if you want but it will be damning..... I am sure that Interest log IP addresses as well, and who likes who's posts.... but lets just consider the time based clustering....
facts not opinions HW2
I'm retired and agree with you on this (no one with a net worth of 3m should receive Super).
I like the fact that ACT are brave enough to say they want the retirement age moved to 67 - all parties should get behind this.
Super should ONLY be available to NZ residents who have paid NZ tax for 20 years.
(Edit - I should say that I have never applied for NZ Super)
I'm earning under 70k and net worth about 2 million. But if your system was in place and I approached your necessarily arbitrary boundaries I'd transfer property and wealth to my wife (intending doing that anyway) and children (I can trust them). It is just too easy to fiddle (for example send wealth overseas). If you want to save money on Super then change the age from 65; pay less (NZ Super is higher than UK pension) and insist on more years living in NZ - I get full super but arrived aged 54.
Note if you earn over $70 your Super is taxed at a higher rate.
Means testing Super is a recipe for happy accountants and lawyers and civil servants.
For the tax year ended march 2023, 4328 people earning over $250k per year were paid national super.
at the rate of $21,250 per person (couple rate) that is $100 million a year, or, 1000 nurses.
Drop that income level to $180k, NZ paid half a billion in super.
Clearly, someone over 65 earning $180k is not hard up.
income test national super. That half billion would plug everyone’s fiscal holes.
there is no need to increase the super age. Just income test the bloody thing. All other beneficiaries are income tested. Why are the Wealthy elderly exempt? Super is paid for on current tax receipts, so the old “Ive paid taxes all my life” sophistry is just weak sauce as an argument.
Moot.
The burden today is far greater than at any point in NZ history. And quite frankly I do not want my kids paying through the nose so I can retire in a $3m home on a more than adequate income. If you can’t afford to eat but have a second home worth millions, sell.
We’re not supporting them at this point, we’re preserving their “wealth”, and that’s wrong.
There are many elderly who need the support, and I support that. But far too many don’t.
You lived through an era where energy was virtually limitless and free, barring the oil shocks. Then benefited from gross irresponsibility of people who acted to extend and pretend that limitless energy growth could continue forever via stupid monetarist policies, acting to protect you from any pain, while creating extreme pain for those coming after you.
The future can't pay those commitments any longer as the chickens come home to roost.
I know some boomers now with a huge lifestyle block, something like 8 vehicles including a massive camping vehicle. 2 people who travel extensively on overseas holidays, burn enormous amounts of fossil fuels to support their lifestyle. One was a stay at home mum, the other an engineer, both had good super plans and bought properties where they could sit back and enjoy endless capital gain. They still have huge incomes and both collect super dilligently.
Sure they played the game well and benefited from it, but its sickening when their children can barely afford their 30 year mortgages and their grandchildren are living in abject poverty. What they experienced can simply never be repeated again unless some magic free energy technology comes out in the very near future.
No. Student allowances are income tested against either your parents income or your partners income. For students over 25, its just partner income. Many students tick the box saying they’re single so they get the full allowance on the basis that they have to pay it back regardless so where is the harm.
Check out this start-up from ASB's parent company CBA. This is nuts. If this is not subprime or near-abouts, I don't know what is.
A start-up funded by the Commonwealth Bank has quietly begun loaning customers their home deposits, allowing more Australians the chance to get on the property ladder.
OwnHome effectively offers a second mortgage to cover the cost of the deposit, charging a higher interest rate that borrowers pay off at the same time as their primary loan.
It removes the need for the lenders mortgage insurance that people with less than a 20 per cent deposit typically have to pay as part of a play to upend the housing market.
https://www.afr.com/technology/the-cba-backed-start-up-that-wants-to-pa…
Back in the "good old days" (30+ years or so ago), solicitor or vendor finance of the deposit was an occasional option, especially when a property was slow to sell. We bought a couple of properties that way (12%pa interest IIRC).
Perhaps bank / disclosure rules make these alternatives untenable nowadays ?
Ah yeah back when it was a first mortgage, second mortgage and vendor finance. The "good old days" of high returns savings accounts, low house price to income ratios etc, the generation of the day were too frivolous to save a deposit, so they rushed out and loaded themselves up on debt.
Tony Alexander is an enigma. Heard him on RNZ a couple of days ago and he was excellent. In the link below he is DGM on consumer activity, yet still sees an upside to housing. He seems to have real cognitive dissonance on housing, but provides quite good commentary at times on other things:
https://www.macrobusiness.com.au/2023/09/reserve-bank-grapples-with-dee…
I used to subscribe to his paid weekly newsletter but changed to interest.co to get the valuable comments and feedback ;).
I still read his free weekly, I see comments here why people downvote him however I have usually found his opinions well supported by his research. And he has a plain English commentary.
I don't think TA knows that he is totally "see through" in his talks on real estate??
He is totally a paid stooge.
He constantly told people to buy property, even when the DTIs were at 12x plus in Auck. He made up plethora of reasons that the party was sure to go on, to the moon in fact.
Now that DTIs are down a little (still outrageous) he doubles down. The rooster has no shame. Paid and bought stooge.
He mentioned his subscription numbers once in the first year which I multiplied by the then $110? pa to equal several '00,000s.
Now $150pa & GC property has nearly doubled since (my GC relatives has). My recollection is that Tony bought it off the plans just before Covid ?
The Bank of England in the process of figuring out ways to bailout insurance and pension funds without calling it a bailout.
“Urgent policy intervention was required to prevent a self-reinforcing downward price spiral in government bond prices causing unwarranted tightening of financing conditions and credit supply to households and businesses,” Hauser said.
But Hauser pointed out the interventions were indirect. The Bank of England could only provide liquidity to traditional banks, who could then lend it on, or hoover up distressed assets in an attempt to calm the market.
There is no facility which allows the central bank to funnel liquidity directly into firms like pension funds and insurance firms.
“It is unrealistic for the private sector to self-insure against the most severe system-wide liquidity shocks: in such cases, safeguarding financial stability requires an effective public backstop,” he said.
https://www.cityam.com/bank-of-england-seeks-more-ammunition-to-deal-wi…
Aussie bank stocks 17% overvalued according to the venerable Chris Joye using his proprietary “bank equity bond premium” model.
How far would Aussie bank stocks have to fall to normalise the bank equity bond premium back to its average level? The trailing P/E multiple would need to decline from 14.9 to 12.5 times and the 12-month forward P/E would have to fall from 13.8 to 11.5 times.
On this basis, Aussie bank equities are 16 per cent overvalued using actual earnings or 17 per cent rich applying one-year forward earnings expectations. In practice, normalisation of the bank equity bond premium back to its historic range could also be assisted by lower real bank bond yields.
https://www.afr.com/wealth/personal-finance/bank-stocks-17pc-overvalued…
will repost in AM https://www.nzherald.co.nz/nz/takapuna-milford-coastal-walk-family-clos…
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