Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Kiwibank today raised its floating rates for mortgages and revolving credit accounts by +10 bps to 5.80% and 5.85% respectively. (Ditto for AMP Home Loans.) It also raised its overdraft base rate to 9.90% (also up +10 bps). Overdrafts attract margins on top of the base rate. TSB Bank has raised three fixed term rates. Its 2 yr special is up to 4.79%, its three year special is up to 4.99%, and its unique ten year fixed rate is up +21 bps to 6.20%.
DEPOSIT RATE CHANGES
F&P Finance (FlexiCards) have raised their TD offer rates for terms of 6 months to 2 years. The rises are between +5 and +20 bps. We are aware that more institutions will be changing rates tomorrow.
NO PROGRESS HERE
New dwelling consents are down -7% in June nationally compared to May. And Auckland has little to cheer about in new dwelling consent figures, with June numbers lower than a year ago. But that Auckland data hides a compositional shift. As Infometrics notes: "In the June quarter, consents for houses in Auckland were down 19% from a year earlier and have been in steady decline since November last year. In contrast, consents for both apartments and retirement units more than doubled over the over the period, while consents for townhouses rose 12%."
NO PROGRESS THERE
Things are even softer in Australia. During June, new home sales fell -6.9 compared with the previous month and were -11.9% lower than the same period last year. That puts them at their lowest level since October 2013 with sales sliding in both the detached house and multi-unit sides of the market.
NON-RESI CONSENTS SOFT TOO
Infometrics reports on non-residential building consents: "There was $451 mln worth of non-residential consents issued in June, which represented only 60% of last year’s exceptionally high result. But at $6.24 bln in the year to June, the value of non-residential consents is still sitting just above our expectations. We expect to see further softening in the second half of this year, as private investment comes down from recent highs in Auckland, and building activity continues to soften in Christchurch. Further out, continued buoyancy in economic conditions will drive a rebound in growth from late 2018."
DISCOUNTS GROW
Are you getting a 15.4c/litre discount on the pump price when you fill up with petrol? That is what MBIE says the average discount is. It is close to the 16.8c/L discount that was around in March. As an average, that seems very high to me. Some buyers must be regularly getting more than a 20c discount, but I doubt it is retail customers getting that regularly.
NO GROWTH IN FLOATING MORTGAGES
As at the end of June, 78.8% of all mortgage lending was for a fixed term. That is the highest level since December 2008. Conversely, only 21.2% was on floating terms and the $51.2 bln involved has been stable at that level for more than two years.
DIVERGENT TRACKS FOR NBFIs
Total lending by non-bank financial institutions who take deposits from the public is going nowhere, according to data released by the RBNZ today. Since the start of 2012 when these loans totalled about $2 bln, they have since slipped to under $1.5 bln. That is a long way down from the lofty $9 bln they loaned in mid 2007 (remember the finance company era?). The situation is brighter for finance companies that don't take deposits from the public. They now have loans outstanding of $7.4 bln, up from $5.2 bln in early 2012. Their recent high water mark was also almost $9 bln in 2008.
A NEW WA BOOM
More than half the world's demand for lithium is being mined in Western Australia. Demand is exploding as the use of lithium-ion batteries shifts from consumer gadgets to cars, and the pace issure to pick up. There was one WA mine in 2016. There are four now. And at the end of next year there will be eight, based on consents already issued.
WHOLESALE RATES STABLE
There have been few changes to local swap rates today. Rates for terms 2-4 years are just -1 bp lower. The 90 day bank bill rate is up +1 bp at 1.95%.
NZ DOLLAR FIRMS
The Kiwi dollar is marginally firmer today at 75.2 USc. On the cross rates we are also up a little at 94.3 AUc and at 64 euro cents. The TWI-5 is at 77.7. The bitcoin price is basically unchanged today at US$2,715, even though it is recovering from some inter-day softness.
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13 Comments
Rate doctors everywhere.
For Australian central bank watchers, it seems no one is neutral on where neutral actually is.
Economists and money markets are betting the point at which interest rates are neither stimulative or restraining is lower than the central bank’s estimate of about 3.5 percent. And if markets and analysts are right, that means there’s less stimulus in the economy than the RBA thinks, even before factoring in the tightening effect of a rampaging currency.
While the board will likely leave its official cash rate unchanged at a record-low 1.5 percent Tuesday, the release of the neutral estimate almost two weeks ago sent the Aussie dollar soaring in the belief policy makers were laying the ground to tighten. It was only after Deputy Governor Guy Debelle and Governor Philip Lowe used speeches to dismiss the significance of the rate’s inclusion in the July minutes that the frenzy briefly eased.
The RBA estimated the neutral cash rate at 3.5 percent: equivalent to a real rate of 1 percent plus the 2.5 percent midpoint of its inflation target. But it’s notable that CPI hasn’t reached that midpoint since mid-2014; indeed five-year inflation swaps show 2 percent is a more realistic average for inflation, which would provide a neutral rate of 3 percent. The median of 10 economists surveyed by Bloomberg was similarly 3 percent. Read more
Asset purchases like those through quantitative easing are here to stay, no longer specific to the emergency or extraordinary category. What was unthinkable in 2007 is now ordinary. The reason is the statistical view of economic decay, the so-called natural rate of interest, or R* (or R–star). By the best guesses of economists, R* has fallen so low that they will no longer be able to raise short-term rates very far.
How do they know what R* is or has been? Perhaps the pre-eminent scholar working on the modern interpretation of the natural rate is San Francisco Fed President (and CEO) John Williams. In a paper published the day after the FOMC voted for its second “rate hike”, Williams along with co-authors Kathryn Holston and Thomas Laubach wrote:
“Although economic theory provides insights into the various factors affecting the natural rate of interest, measurement of the natural rate of interest has proven more challenging. This arises because the natural rate, like other latent variables, must be inferred from the data rather than directly observed.” [my emphasis]
In other words, they don’t really know. What they do know is that interest rates all around the world have fallen to extremely low levels, sometimes hugely negative levels, and therefore there must be “some” reason for it. Trying to reconcile how such massive “stimulus” failed to stimulate anything, they come up with a very low R* that, again, preserves monetary policy as “stimulus” while recognizing this reality where by public perception at the very least the world hasn’t turned out the way it was supposed to when subprime was contained.
In February this year, Williams wrote the following: “the U.S. economy has fully recovered from the recession following the financial crisis, and the most recent estimates of r-star there have shown no signs of rebounding.” The most obvious inference from that statement is that he is using the word “recovery” in a way that is very different from what it actually means. Recovery, as in the business cycle segment, means just that – complete healing from the trauma of recession. What Williams wrote instead was that the economy has fully recovered even though there is no sign of it having healed even slightly. He has detached monetary policy from reality because he thinks he can. Read more
Great journalism here from the herald:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=118…
I love this quote:
"There was a strong process and technique," Choong said. "There was hope and emotion that the house will sell."
Well as long as you have "hope and emotion"...
I'm not sure why this goes on website except to try and create an impression the market is still bumper.
And this dross:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=118…
Look at the headline.
It will acknowledge that things are slower before reverting to the usual spin:
- winter (rainier than usual)
- pre-election
But that, wait for it.... sellers price expectations are moderating and moving into spring, post election, the market will pick up blah blah blah
The RBNZ C30 data released last week, shows the regional issue , and how one city has engulfed housing and will at some point provide calamity.. Using the C30 data which provides monthly new loans and increases in existing loans, Auckland which accounts for approximately 30 percent of the nations housing stock , in the past 6 months sales have slumped to just less than 30 percent of national property sales, (having come down from the peak of 40 percent thru most 2012-2015 - who says there was no speculation ), yet at present accounts for 50 percent of all new lending /loan increases. Proportionally bizarre and yet prices have stalled or indeed fallen if the HP index has belief. Put another way New Zealand ex Auckland, accounts for just over 70 percent of all property sales, and only accounts for 50 percent of new loans or the increase of existing loans.
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