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Following the sharp wholesales rate rises, NZ's largest home loan lender takes fixed mortgage rates up to another level. It also raises term deposit rates

Personal Finance / news
Following the sharp wholesales rate rises, NZ's largest home loan lender takes fixed mortgage rates up to another level. It also raises term deposit rates
leaping higher

ANZ is making sharp increases to fixed-term home loan carded mortgage rates across the board.

The bank is pushing through a +45 basis points increase, far above the recent +25 bps Official Cash Rate increase from the Reserve Bank.

ANZ no longer offers any mortgage rates below 3%.

And now ANZ's four and five year fixed rates are well above 5%.

These changes follow sharp wholesale rate increases in the past few days, that are sticking after their initial jump.

Since the surprise CPI jump on Monday, wholesale swap rates have risen about +30 bps.

Since the October 6, 2021 RBNZ +25 bps OCR rise, wholesale swap rates have risen about +50 bps. So that means today's +45 bps rise by ANZ is a lesser increase than for wholesale money costs.

At the same time, ANZ is also sharply raising term deposit offer rates.

ANZ's move is likely to be followed by similar increases by all other retail banks. Wholesale money costs affect them all, but they especially affect the larger banks. The challenger banks get their signals from the competitive situation in the retail deposit markets. ANZ's increases there are more in the +30 bps range for terms under 1 year, so these challenger banks may have opportunities to expand their competitive difference.

One useful way to make sense of these changed home loan rates is to use our full-function mortgage calculator which is also below. (Term deposit rates can be assessed using this calculator).

And if you already have a fixed term mortgage that is not up for renewal at this time, our break fee calculator may help you assess your options. But break fees should be minimal in a rising market.

Here is the updated snapshot of the lowest advertised fixed-term mortgage rates on offer from the key retail banks at the moment.

Fixed, below 80% LVR 6 mths   1 yr   18 mth  2 yrs   3 yrs  4 yrs  5 yrs 
as at October 21, 2021 % % % % % % %
               
ANZ 4.00
+0.45
3.24
+0.45
3.54
+0.45
3.70
+0.45
3.94
+0.45
5.04
+0.45
5.34
+0.45
ASB 3.55 2.99 3.29 3.45 3.69 3.99 4.29
3.55 2.99 3.29 3.45 3.69 3.99 3.99
Kiwibank 3.55 2.95   3.30 3.65 3.89 4.19
Westpac 3.55 2.99 3.25 3.45 3.69 3.99 4.29
               
Bank of China  3.45 2.69 2.89 3.09 3.39 3.65 3.95
China Construction Bank 2.99 2.99 3.29 3.69 3.99 4.29 4.39
Co-operative Bank (*FHB only) 2.99 2.79* 3.29 3.60 3.89 4.14 4.29
Heartland Bank   2.35   2.60 2.90    
HSBC 2.89 2.69 2.89 3.09 3.29 3.59 3.84
ICBC  2.85 2.45 2.65 2.85 3.15 3.65 3.95
  SBS Bank 2.89 2.75 2.99 3.15 3.45 3.95 3.95
  2.89 2.74 3.04 3.20 3.44 3.94 3.94

Fixed mortgage rates

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Daily swap rates

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Comprehensive Home Loan Calculator

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118 Comments

Wow big mortgages will suffer defaults will be coming

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7

Those people who fixed their whole loan for a year last year will be in for a shock. Regretting only fixing for 3 years at 2.65% now. Should have taken the 2.99% for 5. Ah well

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8

....and its the peak of the market too - Rates bottomed out at 2.29% in Oct 2020 and 70% loans written since then have been 12 month fixed loans- every loan that rolls from Nov will be have a full 1% increase on their rate.  Thats $53 extra required per month for every 100K borrowed.

$500K = $265 per month

$700K = $371 per month

$1M = $530 per month

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6

I should add NOT regretting that I broke my 1 year fixed term for half my mortgage and fixed for 2 years at 2.49%a couple of months ago. Be looking at 3.3% if I did it now

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0

I broke everything in May and refixed for 5 years. Some were due right about now.

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3

When you consider some 40% of loans are taken out on interest only terms, price increases as a proportion of total payments is massive.

 

"but banks stress test at x% " .... sure, but what is the quality of that stress testing and the methods used for calculating expenses?  Just look at what the Royal Commission found in Australia when they looked at how banks were calculating expenses.  Did the RBNZ bother to do a similar investigation, despite these being the same companies ... of course not.

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2

Finally - after many years - a bit of positive news for people with bank term deposits. In particular, many senior citizens will be relieved.

There's justification for interest rates to rise - but the increases won't be overwhelming......

Nonetheless, there'll always be those who have over-committed themselves and, in response to market discipline, will hit the wall at speed. Thus, for others there'll be a silver-lining. 

TTP

Up
9

How many of those senior citizens got sick of the low TD rates and invested in investment properties?

The bigger the debt linked to housing the bigger the magnitude of hurt from rate rises. Rate increases don't have to be overwhelming to cause carnage with so much housing debt.

NZ lets face it, for over a decade now we've been on an unsustainable path blowing up an asset bubble and at some point in time we're going to have to suffer the consequences. Who knows when that will be but some people are starting to think the time is closer than first thought.

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14

I'd hazard a guess that ANZ know pretty well which mortgages on their books will be moving from green to amber, or even red.

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2

A few smug under 40s think they”ll be fine and can handle it. There’s a big difference between theoretical economic pain and realised pain. Not many know what it’s like - as you have to go back to the  early 90s to see widespread economic hurt in this country.. as they say “a recession is when my neighbour loses his job - a depression is when I lose mine” 

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11

Unless you live through the 1930's-1940's as young adult, and are still alive today, then you likely have no idea what real sacrifice and economic pain is.

Boomers certainly don't as everything has been done since they were born to ensure they had smooth sailing throughout their lives.

Millennials are the equivalent of the GI's of the 1930's-1940's who will live through this current madness and remember it for the rest of their adult lives and do their best to ensure that it doesn't happen again on their watch.

Boomers won't change anything as they think the world revolves around then, yet they wonder why everything is falling apart around them when they are unwilling to make any sacrifices. Not their fault though as they were conditioned to believe the world worked in one way, not realising it was what their parents did for them that made their lives work out relatively well. Now their parents are almost all dead, they are lost and confused and don't know what to do.

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15

Yep, I guess every generation has them, but perhaps this generation more than the past.

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0

Dgm. 

 

Not helpful. 

 

Kiwis don't default. 

 

They hang on, hunker down and ride it out. 

 

There are very, very few mortgagee sales and mainly only pacific islanders bankrupted through sickness, job loss and sending money to family in the islands for funerals. 

 

I know because I worked in insolvency negotiating between debtors and creditors. 

 

So no, there will not be mass defaults. 

Up
5

It might be 'different' this time if the option of dropping rates doesn't eventuate. Not saying that is what will happen, but just saying that in past recessions, the RBNZ has had the luxury of dropping rates to help save those at risk of default. But the size of the debt now and the ability to drop rates significantly has been nearly completely eroded - this could see very different outcomes in the next recession that what you have experienced in the past.

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5

Yeah, I've mentioned on this website before. The reason New Zealand were doing better than other countries during last GFC was OCR back then pretty high, so RBNZ was able to slash it to help economy to recover. Now with our historical low OCR, when the next crisis hit (could be this one), we are not able to do the same. I think people intend to forget what a recessions is really about, some people are even looking forward to a recession so they can just enjoy low interest rate to inflate their assets price. And these people seems to get the orders wrong, low interest rate comes after recession. In a severe recession scenario, most people lose their jobs, housing market crashes, businesses and banks go bankrupts, investors are scared to invest. It's lose lose situation for everyone. 

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3

Many will regret not taking 3.5% for 5 years that was available 6 months ago. The 1 year fixed party is over.

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2

6% in 6 months ?

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7

6% will look cheap in 1 year's time.

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3

You guys are talking a load of garbage.

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15

Yup, but most on this page are a bunch keyboard idiots. Always a good laugh

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4

Its not garbage but they need to be more specific, 6% on what ? The ANZ 5 year rate is practically already there. One more OCR rise and you have your 6%. I will only take the OCR to get back to 2% and you will pretty much have 6% across the board on even 3 years fixed rates, hardly an impossible scenario the way things are trending.

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10

If the 1 year rate is 6% in a years time we will have significantly bigger problems than the 1 year rate at 6%.

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3

Just checking, you are talking the one year fixed rate right? Given the article was mainly focused on ANZ's new one year rate 

If so, 6% in 6 months - garbage. 

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3

Feeling nervous?

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2

Why would I, I have locked in.

So you think the one year fixed rate at 6% in 6 months is credible?

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0

I called this yesterday that ANZ would go either today or tomorrow and there would be a 3 in front of the number.

 

That's the end of 2% interest rates 

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4

Go Heartland bank. The little engine that could

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5

I wanted to move to Heartland from BNZ but Heartland are so so so slow in processing your application, don’t give any cash contribution and you have to pay lawyers etc, have to move all your main accounts to them, it was so drawn out and there were 2 rate increases from the beginning of my application that I just fixed with BNZ. To top it all, there is no phone number to call to ask for an update. Must say though their email responses are not bad, they reply back same day. 

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0

How long till the media start the sob stories for the over extended first home buyer? I guess 6 weeks

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6

Probably stories about the investors being penalized just for trying help put a roof over people's head and reluctantly having to increase rents.

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29

Stuff have already written articles about the poor home owners taking the hit. It's the comments that get me though.

The "it's just supply and demand, interest rates have nothing to do with house price rises" brigade are suddenly worried about interest rates, funnily enough.

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22

There was just some smug guy yesterday gloating that interest rate rises were not doing anything to the housing market.

Well, let's see what happens once the OCR reaches 2%, as current swap rates are clearly assuming.

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17

Poor investors - they can cry me a river.

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22

Investors will be fine - it’s the speculators pretending to be investors that will get slaughtered..  

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1

No one thinks they are a speculator until they are slaughtered.

Something about hindsight.

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5

Funny how on the way up it’s skill and on the way down it’s luck.. 

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7

The only time an investor is worthy of sympathy is when they built new to rent. Any other time they're just a parasite, unless they can prove they are charging an affordable rent.

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10

Haven't you read the Stuff comments? All of them are charging below average, apparently. Not that they care about interest rates, they'll just put the rent up $XXX/week.

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7

My property manager called me a few weeks back saying he wanted to increase all rents - I said sure, go ahead. He just increased one from 450 to 590 pw. Looking at the 39 3-bed rentals available on Trademe in the whole Hawkes Bay region, that is still low. 

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5

"All of them are charging below average, apparently. "

Lol, At least that's what the Property Manager is telling them.

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0

I used the word "affordable" not "average". If you think $300+ is affordable on the median wage, without income support then you are so far out of touch as to be in lala land.

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1

Been a hot minute since I last saw a mortgage rate with a 5 in front of it.

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1

This is just the beginning. It will be interesting to see what is going to happen to the housing market once the OCR reaches 2%. Swap rates are now clearly assuming an OCR peak over 2%.

Up
9

I'd love to see rates rise but I know they won't be able to go very high and will probably be back down before long. If the global picture is anything to go by anyway. 

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2

It won't get to 2%.

The economy will tank before that happens, and if anything the rate will gravitate back down again.

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3

Wholesale market rates aren't going to fall just to suit us. It's not the OCR driving these changes.

Up
10

Well if the market is doing much of the heavy lifting that's another reason the OCR won't increase that much.

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2

As expected by me

Look outside : it’s cloudy and rain coming

Econ forecasts utter self- interested confirmation biased drivel

Recession and deflation coming once this inflation crushed by Chinese housing market implosion. Think 2017 on steroids

Up
4

Agree, Mike.

Where do you see the OCR peaking?

I am saying 1.5 maximum.

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3

Must be a whole lot of Millenials wondering what the hell is going on.. 

Up
6

... for generations borrowers have complained that their bank manager is " a prick " .... and , looking around at the wide world of investment bubbles , from house prices / sharemarkets / oil & gas / rare art / craptocurrencies such as Buttcoin ... one has to wonder .... which bubble will be pricked first by soaring interest rates ....

Up
8

I'm in the middle of the millennial age bracket and most I know bought too long ago to be worried about rising rates. The houses we bought only a few years ago are worth at least 50% more, which doesn't help us but surely screws the younger millennials and zoomers.

Up
2

The younger millennials will be heading to Australia soon enough. Stay in NZ with crappy overpriced housing and low wages? Yeah nah...

But the government won't care because they can replace them with immigrants with lower expectations of wages and living conditions. It's just globalisation where the labour comes here instead of staying in China etc, both pushing up rental demand and house prices while squeezing young Kiwis out.

Up
7

But they stress test the loans to 6% so everyone should be fine?

Does anyone know what formula they use to work out how someone can be OK going from say 2.99% to 6%?

Does it involve cashing in your KiwiSaver, taking second jobs, selling other listed assets, forgoing health insurance, mince every night for dinner etc?

I think what they mean by OK is from the bank's point of view, not their clients.

 

Up
12

Great questions Dale.

I think it would be really good if Interest did an article on this. It's very relevant to the website's core purpose.

We need enlightening on these dark arts! 

Up
11

Yes, another question that I would like answered is, do banks take out an insurance policy ie can get paid out from, against a customer's loan that goes into default?

The reason I ask is I know of a case where a solo mother with a child that had a medical misdiagnosis and resulting in huge financial costs, and this lead to events with the mother not being able to keep up mortgage repayments. The bank sold her house at a mortgagee auction and bankrupted her on the outstanding $20,000 even though there was more than enough supporting evidence to show there was no benefit to anyone involved to bankrupt her due to being penniless with a child left with a disability.

The only reason I can think a bank would do this (besides being morally bereft) is that to claim on any insurance they would be required by the insurance company to take all possible legal channels available to seek repayment before they could claim against the loss, including bankruptcy.

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1

Mince is up to $20 a kilo if not on special. Think re-hydrated navy beans not mince. 

A few more articles like this in the future if things go more pear shaped:

https://fcaa.org/2018/03/14/how-to-feed-a-family-of-4-on-50-a-week/

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4

... lentils are a personal favourite ... delicious & nutritious , full of fibre & protein .... easily stored when dry ... for a family they give one helluva run for their money ... 

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2

Nice work Gummy, 'helluva run' , good one

Up
3

They could try living on Gummy Bears https://www.u-buy.co.nz/brand/giant-gummy-bears while singing this song https://www.youtube.com/watch?v=astISOttCQ0 

 

Up
1

Good quality lean beef mince $9.99/kg at our local butcher in Barrington ChCh.

Fresh fruit < $4/kg ( often <$2/kg) from local funky greengrocer.

Major supermarket chains are rorting it

Up
2

"It's all fun and games until someone loses an eye"

Both banks and their customer have been looking the other way when it comes to mortgage applications. What did I read last week? +40% of Aussie loan applications have been 'embellished". And the banks know it. So you're right. It isn't the borrowers that are protected by any form of buffer calculation.

 

(PS: If this does causes some sort of property market recalibration, then All Political Parties/RBNZ had better not squander the opportunity to, finally, do what has to be done - and hold onto the 'gains')

Up
6

Yep, this news item is rather telling...

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0

41% had factual inaccuracies. Wow. I wonder how that compares to NZ.

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0

Yes, the Aussies have been caught doing it time and again, because their regulators go looking for it.

Most of our banks are Aussie banks, and in lieu of no regulators caring to look, I think it is a fair assumption to think that there is some embellishment going on, or at least their definition of the stress test is one that always sees them being OK. Unfortunately, the customer thinks they are included in this.

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1

Totally agree, but have you seen the price of mince?

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2

I guess begging on the street is always an option.

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1

... scooping up fresh roadkill could be the new Kiwi way .... Annabel Langbein's new TV cooking series : " 101 delicious ways with possum " ....

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3

Time to bring the Pindone bait stations back in from the paddocks. Rabbit stew could be not too far away.

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1

The really big assumption underpinning the mortgage isn't whether the homeowner can meet the payments, it's that they can resell and make both themselves and the bank whole if they can't.

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3

Umi, uncommitted monthly income. And yes a higher percentage rate applied. 

 

People will just go interest only if needed.  

 

This is just noise. A storm in a teacup. 

 

Humans love to have something to worry about. 

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2

Some food for thought.

Every half a percent increase results in an extra $100,000 worth of repayments over the lifetime of a 30 year mortgage on a million dollars worth of debt.

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8

Why would you pay a mortgage over 30years? 

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0

Because interest rates are low and you can get a better return on excess funds by investing elsewhere.

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3

Those other investment returns aren’t guaranteed though, the interest payments on a mortgage are and also tax free. 

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0

Albert, the only thing that is guaranteed is death

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1

That's a bit macabre mate..you don't pay taxes then? lol

 

Up
0

Financial decision makers at RBNZ should be replaced by ANZ economists and decision makers.

Unnecessary we are paying for incompetent team lead by Orr.

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0

It's also going to be interesting to see what happens when all those people that have bought off the plans, based on past rates, go to confirm funding on their unconditional contracts in the next 3 to 12 plus months.

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8

Yes.

But again, if banks have genuinely stress tested at 6% at pre-approval stage, then surely a rate of say 5% rather than 3.5% won't be a killer for the deal? (Although it could make some household budgets extremely tight).

Might this potentially affect investors more than FHBs?

 

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1

I already can guess the true answer to the 6% stress test.

It really means the bank getting all their money back, and the customer living a completely different future than the one they thought they would be living.

 

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3

And one wonders if the 6% stress test should now be 8-10% (ANZ was at 7.5% not that long ago). And if it is, how likely is it that anyone will be able to get mortgages? And if nobody can get mortgages for the current price of houses...

Up
7

Banks are full of pretty clever people who know what to do.

They cant do anything about already issued loans - they will just hope those people have a pay rise that will counter the lift in rates, but they will apply new levels for new loans ie if in June they were using 6% as the loan level its likely they will now be using 6.5% or 7%.

Banks whilst they will do it - prefer not to mortgage sale properties - so they try to make sure there is always enough buffer.

What it does mean is borrowers in the future may find what they are pre-approved for today will be less when/if  their pre-approval is renewed - assuming no increases in income.

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2

Banks are full of pretty clever people who know what to do.

I'm a software engineer at one of the blue banks.

No they're not.

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18

Haha.  Indeed.  :p

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6

My experience of bankers is they often have quite significant intellectual limitations.

Doesn't mean they aren't good at their job though.

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1

I might get a new pre-approval just to see if there are any changes.  The amount they were previously willing to lend to my single income household was next level stupid.

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1

you do realise everytime you get a pre approval it goes on your credit record

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2

What is the issue with that?

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2

At a time where interest deductibility on existing dwellings for investors is being phased out.  

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2

Also not a problem. Construction loans have percentage margin for contingency. 

 

Only problem is if final sale price went up. 

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1

Not necessarily a problem for developers with developments in progress.  

I think Dale and I were talking more about the buyers.

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0

Literally the announcement of a downturn. People are about to find out what happens to a risk on country when too much risk is taken on. Rbnz may realise that 33% house price increases do not represent financial stability. Textbooks will be written on these errors. Even lowering the OCR will not help as the inflation train has left the station and people are dumping dollars in the knowledge they are worthless tomorrow, whereas physical goods will only go up in price. Did the 6% test rate include petrol costs at these levels or food costs or rates the council are charging? No.

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14

Great comment, even if you are a Liverpool supporter :)

Pivotal moment today.

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3

Can't say for sure, but it does feel a bit like Bascand is leaving RBNZ knowing the carnage that is coming.

Slow motion train crash.

It's astounding how oblivious most people are, including most people I know in the development sector. Is it wishful thinking or just stupid ignorance?

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5

Recency bias. 

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4

Yeah.

Another generation of people in the development sector and related jobs are going to get a profound life lesson.

I got it in 2008.

Having said that, I know people who got burnt in 2008 who don't seem to have learnt their lesson, given current behaviour...

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4

The central bank interventions are the problem in my view - people actually believe there is no risk and that they will be bailed out regardless. They don't realise that central banks have lost control (in my opinion).

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3

Not sure how you could get burned in 2008. I bought a house in 2005 and sailed through the GFC like it never happened. House prices just remained flat for years and my RV only went down $10K after the supercity merge. Sure house prices never did that much after that for a decade but ever since that they have gone nuts and more than made up for it. We don't yet know what a severe economic event is in this country.

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2

I was in London for GFC in 2008 and it was fairly horrific.  Over there its still in the memory of the general population that there can be severe consequences for being reckless in financial matters.

In New Zealand they didn't get the memo.  La la land.

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6

I am talking about the development sector and employment, not house prices.

You may remember NZ had the one-two punch of mezzanine finance collapsing and then the GFC...

And you may recall we had the luxury of cutting the OCR deeply then, which we don't have now...

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1

If you keep your job in a recession, you do well. The mortgage is cheaper, and there are sales all over the place.

Some are laid off, and many households rely on overtime or more than one income. 

The other key factor, is that the self-employed are still employed but their incomes take a massive haircut.

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0

Fixed 3.05% for 4 years with ANZ a couple of months back.  Now it's at 5.04%.  

 

O_O

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7

So I guess now isn't a great time to tick up a new Audi? 

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0

What happens when interest rates rise across the board? People stop discretionary purchases - (that Audi!).

That.....will be Deflationary.

What New Zealand needs now is not higher interest rates, but control of the ONE aspect of the economy that is dependent upon lower rates and unbridled issuance of debt.

If the recent ,small Bi-Partsan cooperation on housing can be made into a beast with more teeth, then controlling debt into housing and allowing rates to stabilise or fall might be the best future our politicians can give us.

People and lenders can handle a notional fall of 50% in their net worth - it's just a number after all - IF the indebted can still service their existing commitments; which isn't 'just a number' - it's real cashflow.

Do our current politicians and bureaucratic mandarins have the foresight and courage to do what has to be done? We are about to find out.

 

 

 

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4

Deflationary to an extent, but what about oil costs and the supply strains now that just in time manufacturing has been killed? What about the green revolution and the move away from products manufacured in China? What about the worthless fiat currencies? What about the increases in rents, council rates, food? Deflation yes, but only after a HUGE inflation spike - a tidal wave over an island that someone once called Fiji on steroids...

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2

Inflation. If you have the cash buy it now, not in 3 years

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3

I do like the Audi's but the prices make you wince. Lucky they don't make anything in a manual anymore or I still might be tempted. Will stick with the Subaru, when you hear that an Audi mechanic drives a Subaru that's all you need to know.

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1

I like Subarus as well. Have owned a few and they've always done me proud. 

I tried to place an order on the last of the current gen WRX STI, but got told I'd have to wait nearly 10 months for the car to arrive from Japan so I passed on that. I'm without a car at the moment, and riding my eBike everywhere is getting tiring!

I wonder if we will see some weakening in the car market if interest rates increase and households tighten the belt. Presumably large amounts of car purchases are financed through the mortgage (or just the "wealth effect" and then feel confident enough to go and borrow on dealer finance).

The salesman at Subaru looked at me like I was from outer space when I said I wanted to pay cash - not because you get a discount, but purely because I don't like owing money on anything apart from my house, and even then that scares me. 

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3

I got a Subaru forester last year, really good

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1

Waiting for the new STi myself the current one is out of date and old tech now. Got a Legacy 3.0R which is a WRX wagon anyway which will last a couple more years. expect the new STi 2023

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0

New one looks nice - I don't get the hate for the styling to be honest (they've never been "pretty" cars, always utilitarian which I like).

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0

Errrrrr, be quick?

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4

Those who have been reading Interest for a while know that I have been debating against house price drops over many years, I have been called a spruiker and worse.  I do absolutely believe now, that house prices rises will come to an abrupt end in 2022 and that they will quite possibly fall

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6

It all depends on rates, right? Which in turn depends on how long this wave of inflation lasts. A lot credible people claim it's just supply chain disruption; but it seems like too much of a coincidence to me that it has hit us just at the point when even the most hawkish of economists and policymakers have rolled over and conceded that Inflation Is Dead And Isn't Coming Back. Some kind of cycle there...

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1

Yes it depends on how long higher inflation will last indeed.  It's becoming clear that it's not as transitory as some thought. On the other hand I don't believe that inflation is about to return to its "long term average" because the current inflation isa result of 1) supply issues as you said and 2) monetary and fiscal stimulus, but current high inflation is NOT a result of amazing GDP growth.  I believe that . as governments and central banks remove their stimuli, inflation will evaporate quite quickly, this will then lead on to lower interest rates again.

Since the GFC we have not fixed the economy at all, we have just made it "look good" with government and central bank interventions

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1

Couldn't agree more, especially with aging/shrinking populations and the resultant horrific dependency ratios set against saturated markets/overinvestment in so many key sectors in an era or growing geopolitical instability. A great recipe indeed. 

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Most of those leveraged up have never seen, nor did the seminars ever present, that rates can go back long term normal. The current environment has been the most artificial in a generation, and not sustainable. As rates go up, yields go down. As yields go down so do values, especially in commercial property. Many will soon be topping up their speuvestments, with no tax rinse or foreign capital parachute.

Suddenly they realise they are the naked emperor.

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