Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
HSBC has raised its fixed rates today by +20 bps to +44 bps, after raising its floating rate yesterday. Heartland Bank raised its reverse mortgage interest rate by +50 bps to 6.95%. Bluestone Mortgages raised their 1yr and 2yr fixed rates.
TERM DEPOSIT RATE CHANGES
The Treasury raised its Kiwi Bond interest rates by between +40 bps to +60 bps. Their new one year rate is now 2.10% which is the effective risk-free rate now. That means the risk premium at a main bank is now down to +55 bps to +60 bps. ASB raised its term deposit offers in a catch-up with its main rivals. The Co-operative Bank pushed through another increased in their rates. And HSBC also made across-the-board TD rate increases.
UNDER THE BUS
Our home loan affordability measure is now the "worst ever" since we started tracking it 18 years ago. Worst home loan affordability in the 18 years of interest.co.nz's survey. House prices aren't rising, but mortgage interest rates are, and fast. The flow-on effects of Reserve Bank policies have effectively thrown first home buyers under the bus.
PRESSURES HURTING MOST IN CONSTRUCTION
The residential construction outlook is 'weakening rapidly', according to the ANZ's latest Business Outlook Survey for April. They say the divergence between the outlooks of the residential and commercial construction sectors has never been greater. They also see inflationary pressures in the economy remaining intense.
ONLY WAY IS "UP" AND NOT IN A GOOD WAY
Today the RBNZ released its overall reconciliation for the mortgage market through to March 2022, and it confirms that the September 2021 quarter was the low point in the cheap home loans era. The effective average interest rate dipped then to 3.04% across all home loans. While it is only up to 3.08% by March 2022, it is obvious that it will rise fiercely from here. We collectively paid $9.6 bln in interest over the past year. A rise to 5% would take that to $16.3 bln. That would be just for starters. Our economy will notice a $6.7 bln mortgage interest 'diversion'.
MONTHLY TRADE DETERIORATION QUICKENS ...
The March merchandise trade deficit surged to -$392 mln in March. Remember it was a +$41 mln surplus in March 2021 and a +$792 mln surplus in March 2020. Our exports to the US shone in the month, rising fast. But it was our imports that drove the story, rising +25% from a year ago to a record $7 bln in the month. In fact, they were up almost +40% from the March 2020 level. Exports might be rising fast (and helped by higher commodity prices) but they aren't growing like imports. The fastest rise is from 'diagnostic reagent test kits' which grew from virtually nothing to a $300 mln import line item.
... BUILDING A LARGE ANNUAL DEFICIT
For the year to March, we cracked a -$9.1 bln deficit for the first time. Our position with our top four trading partners is getting worse across the board. For the year, our surplus with China fell -$1.2 bln, with Australia by -$1.2 bln, with the USA by -$600 mln, and with Japan by -$1.2 bln. Those top four account for most of our annual trade movement with the surplus with China falling the most. Still, that overall level is about -2.6% of GDP and about half what we reported for the US earlier today.
LAPPED UP
28 of the 60 bids for today's well-supported NZ Government bond tender were accepted. The April 2025 $100 mln on offer went for a yield of 3.51%, up from 3.26% two weeks ago. The May 2032 $100 went for an average yield of 3.69%, up from 3.41% two weeks ago.
GREEN ISN'T CHEAP
Kāinga Ora subsidiary Housing New Zealand has issued $800 mln of "unsubordinated, unsecured Wellbeing Bonds" into the demand for green-washed investments. They will pay an rate of 4.42% even though they are rated AAA, such is the speed of rising interest rates.
GOLD FALLS
In early Asian trading, gold is down a sharp -US$20 from this time yesterday at just over US$1881/oz.
SWAPS JUMP
We don't have today's closing swap rates yet. They are likely to be sharply higher with these markets "illiquid and dysfunctional" according to traders at some points during today. Update: As some commenters noted, swap rates did ease back at the end of today's trading. The 90 day bank bill rate is up +2 bps at 1.99%. This rate was last at 2% in November 2018. The Australian Govt ten year benchmark bond rate is up +3 bps from this time yesterday, now at 3.09%. The China Govt 10yr is up +1 bp at 2.86%. And the New Zealand Govt 10 year bond rate has surged +12 bps at 3.72% but still above the earlier RBNZ fix for that 10yr rate at 3.71% (up +16 bps). The US Govt ten year is now at 2.83% and back up +10 bps from where we were at this time yesterday.
RECOVERING
Wall Street ended a little firmer with the S&P500 up +0.2% and unable to hold its mid-day gains. Tokyo has opened up +0.7%. Hong Kong has opened up +0.6%. Shanghai has opened up +0.5%. The ASX200 has recovered +0.9% in mid-day Thursday trade. And the NZX50 is up +0.4% in late trade.
NZ DOLLAR SOFT
The Kiwi dollar is now at 65.3 USc and nearly -½c lower than this time yesterday. Against the Aussie we are fractionally lower at 91.7 AUc on the same basis. Against the euro we are a little firmer at just under 62 euro cents. That means the TWI-5 is now at 72.5, and only down a net -10 bps from this time yesterday.
BITCOIN FIRMER
Bitcoin is +2.4% firmer than this time yesterday at US$39,283. Volatility in the past 24 hours has been modest at just on +/-1.8%.
OUR LOSS
And finally today we have a sad announcement. It is Jenée Tibshraeny's last day at interest.co.nz today. She is off to new challenges, and she will be missed here. She goes with our best wishes, and who knows? one day she may be back.
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61 Comments
I added a few houses to my Trademe "watch list".
Several times today my phone has beeped with alerts about updates to the listings. 2 have reduced price today, and one has updated the method of sale from auction, to by negotiation.
This correction is going to happen fast!
Thats been happening now for weeks. I have 20 on my watchlist in Tauranga but that doesn't mean asking prices are falling. I expect many to just get withdrawn it just goes Auction, by negotiation for a week then listed with a price and just sits there. Sellers still holding the Alamo down here.
Looks like today was the disorderly blowoff (particularly at the short end) concluding a technical move that has been influenced by banks hedging their mortgage book. The RBNZ haven't sanctioned this increase in their OCR forecasts, and i suspect we will see a period of softness around the May RBNZ meeting when it becomes clear they aren't going to hike as much as currently expected.
Regarding Megan Woods - $1.4 billion:
Given the current worker shortages and Labour's affinity for Ardernity politics, everybody is just giving it a collective eyeroll. It will suffer a Reverse Cantillon Effect.
NewsHub and TVNZ will definitely run the propaganda piece at 6pm tonight - they'll likely attempt to take it seriously too.
Megan has been too busy doing a run of interviews apologising about how she was 100% wrong that it was the private sectors fault for last years black outs on the coldest day of the year./
"Energy Minister Megan Woods was not available to be interviewed about the report but said in a statement that it was reassuring to see Transpower had made progress in improving how it responds to grid emergencies.
The minister had blamed Genesis Energy for the blackout in August but made no mention of the company in her statement today."
I guess she has a lot on her plate.
https://www.rnz.co.nz/news/national/465964/transpower-responsible-for-u…
The fastest rise is from 'diagnostic reagent test kits' which grew from virtually nothing to a $300 mln import line item.
That's got to be an error. You can purchase a pack of 5 for $18.99 at retail stores. We didn't buy 80 million tests at retail prices!
Best of luck to Jenée in her next role. I've enjoyed your interviews and podcasts.
1.4 billion of our money to build housing infrastructure in Auckland. That's $300 from me and $300 dollars from you and $300 from each and everybody else. And $1500 from each battling little family.
Worse, I live about 1000km away.
Clearly the Minister has not been reading Interest.co where the commonest common tater view is that we need stop our population explosion. Which is exclusively is driven by immigration.
For many years now net internal population flow has been out of Auckland. Yes, out. It's been longstanding. Any population rise and infrastructure deficit is driven by you know what.
We are told immigration is good for the economy. But how come it's the taxpayer has to fork up. Not the 'economy'
I think this is the government putting their toe in the water and watching the ripple.
If they are reading interest they should sense fear, uncertainty, doubt, for them a good days work, question the belief in the ever increasing house values in Auckland and reward their voter base.
Our economy will notice a $6.7 bln mortgage interest 'diversion'.
Indeed it will - that's the equivalent of every worker in the country getting a 4.3% pay cut (based on $155bn total earnings in the last 12 months). What a disaster we are walking into here. Worth noting that NZ banks are currently collecting $1bn more interest every month than they are paying out - most of it from mortgages!!!
[Kainga Ora]... will pay an rate of 4.42% even though they are rated AAA, such is the speed of rising interest rates
Such is the stupidity of this Government. The Crown have over $30bn sat in the Crown Settlement Account. If they spend any of that, they will only pay OCR on it. It's just giving money away to investors.
The climate change industry jumps the shark. Clearly know as much about cows as the climate in 2100. Will the cows lose their job if they don't wear their mask?
https://news.sky.com/story/climate-change-designers-of-cow-face-mask-th…
Gee whizz, young criminals pre-teen and 7 yo doing mall smash and grabs, stealing toys. What next, bad trend. In china they would execute the whole family, in Iraq chop off the hands, while here in NZ there are apologists that make excuses for their "deprivation". Will our govt reward the families and give them new homes and more money
Burglar gang, youngest 7, caught in night-time toy raid at shopping centre | Stuff.co.nz
https://i.stuff.co.nz/waikato-times/news/128482940/burglar-gang-younges…
Yeah I was thinking about that today. I would call myself fairly progressive, but I have a hard time believing that poverty is any more than an effect, it’s definitely not the main cause. The main cause is generational bad parenting. I myself was brought up by a poor solo mum with a big heart and amazing dedication to her kids, if anything I think poverty was an advantage to my upbringing. Really poor families in China that can barely afford rice are able to bring up kids that don’t ram raid the local mall.
Really poor families in New Zealand are able to bring up kids that don't ram raid the local mall as well; yes, even the current generation. Just because media tend to amplify anything which involves kids in order to get those juicy clicks, doesn't mean what they're reporting is at all typical.
The govt will not penalize beneficiaries by reducing their benefits even temporarily to send them a signal as "the kids are the victims" of such moves. Labour reversed some of the national policies in this area, basically endorsing wrong behaviours.
However the kids of these parents are victims already being brought up in dysfunctional and disorderly homes. How will they aim for a better life than the one they know
What does wider scale data show about poverty and correlation/causation of property crimes?
Last time I looked IIRC it wasn't easy to wholesale write off.
Not to say it's ever entirely the cause, of course. We have plenty of crims and unethical folk coming from wealthier families too.
[Kiwibonds] new one year rate is now 2.10% which is the effective risk-free rate now. That means the risk premium at a main bank is now down to +55 bps to +60 bps.
Not much of a premium when you consider the scale of most banks' exposure to a shaky housing market. Might be time to start prioritising return of capital, rather than return on it.
for Builders the outlook is very bleak.
Interest rates up
Inflation up
Harder to get finance
Higher taxes coming - significantly for small businesses & sole traders
https://www.stuff.co.nz/business/prosper/300575175/are-small-business-o…
Increasing regulations on many fronts - some new ones next year involving plumbing & fire in residential homes with significant extra costs.
Increasing costs to meet new code requirements. (insulation) THIS year
There are going to be a lot of builders looking for new jobs later on this year.
This is happening far faster than we could have imagined.
What do you mean interest rates going up and tighter credit conditions might make the cost of building a house more expensive? Given that this cost is driving nearly half of our domestic increase in CPI that would mean higher interest rates increase inflation. Can't be right.
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