News and Opinion, sponsored by RaboPlus

By Emma Geraghty

Banks are increasingly looking for ways  to make it easier for baby-boomer parents to help their children buy expensive houses in the wake of the property boom.

The essential problem is that parents and grandparents may have savings locked up in term deposits or in house values, but don’t want to simply hand the cash over to their kids, while their kids lack either the deposit or the income to make the big leap into home ownership.

BNZ launched its TotalMoney home loan three years ago. It allows savings in up to 10 related accounts to be ‘pooled’ or ‘offset’ against a mortgage, which allows the borrower to borrow more and generates an effective return for the savings that is higher than a regular term deposit rate. However, it means the related savers (often parents, grandparents, aunties, uncles etc) are sacrificing their interest payments so that the kids or grandkids can borrow more.

BNZ’s Chief Operating Officer for Retail, Glenn Patrick, said parents can make a difference to the amount of money their children can borrow and the level of interest they will pay.

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Finance Minister Bill English has announced that New Zealand’s government guarantee for wholesale bond issues by banks will end on April 30, following the end of a similar Australian guarantee from March 31.

The guarantee was used by New Zealand’s banks to issue NZ$10.3 billion worth of bonds under 24 guarantee certificates. There have been no payouts and the guarantee fees earned the government NZ$290 million in fees, English said.

The guarantee was set up in November 2008 in the middle of the financial crisis after Australia’s government set up a similar scheme.

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ANZ has lowered its 3, 4, and 5 year fixed mortgage rates, with a new rate offering below every other main bank, and only beaten by HSBC’s 5 year rate. (Updated with the National Bank rate changes, detail on variable rates)

The new ANZ rate for 3 year fixed is 7.75%. For four years fixed their rate is 8.19%, and for 5 years fixed it is 8.49%. (HSBC’s Premier 5 year rate is 7.99% but there is a high threshhold to qualify for that offer.) However, these rates remain well above ANZ’s simple variable rate on 5.69%, which is different from previous years where fixed rates have often been below variable rates.

This rate change moves ANZ from among those banks that offer the highest rates at these terms, to the leading position.

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Huljich Wealth Management has announced that former Reserve Bank Governor and National Party leader Don Brash has taken over as Managing Director and Chief Investment Officer at Huljich Wealth Management. He is taking over from Peter Huljich, who has resigned after taking responsibility for “not living up to the highest standards of transparency.” (Update 1 includes Trustees Executors welcoming move)

Huljich has been mired in controversy in recent weeks over allegations it misrepresented the performance figures for its KiwiSaver funds.

“In recent days, there have been a number of allegations about the way Huljich KiwiSaver Funds have been managed,” Brash said in a statement. “Some of these allegations are unfair and some are untrue,” he said.

“But since I returned from overseas last week, the board has conducted a full review of our operations. It has become clear that the board has not been kept fully informed in a timely manner about certain transactions, and as a consequence Huljich Wealth Management has not lived up to the highest standards of transparency,” Brash said.
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ANZ has released its New Zealand branch General Disclosure statement for the three months to December 31, reporting a 52% increase in net profit to NZ$253 million from the same period a year ago. ANZ, which also owns National Bank in New Zealand, reported a fall in provisions for bad debt and flat costs over the quarter.

ANZ New Zealand Chief Executive Jenny Fagg said the New Zealand economy had stabilised and would slowly gather pace over the next year or two, which would help drive a significant improvement in ANZ’s business performance.

“We are encouraged by the lift in profit in the December 2009 quarter compared with the September quarter, in line with signs of recovery in the broader economy following the recession,” Fagg said.

“Provision trends are moderating. A key improvement in the December 2009 quarter is the pronounced reduction in provisioning for credit impairment which has decreased from $351 million (September quarter) to $151 million.”

Here is the full ANZ release below.

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By Emma Geraghty

Moves by the Commerce Commission late last year to increase competition on credit card interchange fees and cut retailers’ costs by around NZ$75 million have yet to bear fruit as retailers, banks and credit card companies are stuck in a Mexican stand-off to see who will take the first pain. Consumers, meanwhile, have also yet to see any benefits.

The first moves in this impending battle were made in early January when several independent petrol stations started adding credit card surcharges and some government departments started charging these fees for payments online. These moves followed a slew of announcements from the Commerce Commission in August and October about settlements with banks and credit card companies that removed a ban on these surcharges and removed restrictions on so-called ‘interchange’ fees charged to retailers by banks.

The commission hoped these moves would free up the market, forcing the banks and credit card companies to compete with each other and push down fees and, ultimately, prices for consumers. But this has yet to eventuate.

Instead some retailers and government departments have simply added the fees onto  prices to bolster their profits, raising fears consumers will abandon credit cards and use EFTPOS and cash more often, which would cut the NZ$28.5 billion a year spent by New Zealanders using at least 3 million credit cards.

Profit windfall?

If all retailers were to add the current interchange fees of around 2% to all credit card transactions and they didn’t pass that on in the form of lower prices on all goods this would deliver a NZ$570 million profit windfall to retailers and potentially deliver a slight one-off boost to the inflation rate, adding extra pressure on the Reserve Bank to raise interest rates.

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