Economists for New Zealand's largest banking group, ANZ New Zealand, have called on the Reserve Bank of New Zealand to cut the Official Cash Rate in response to the Christchurch earthquake, starting with a 25 basis point cut on March 10.
ANZ's Head of Market Economics and Strategy Khoon Goh said early estimates were the earthquake damage could cost at the upper end of the NZ$5 billion to NZ$12 billion and knock up to 1% off first quarter GDP. He said a 50 basis point cut was justified.
ASB economist Jane Turner called earlier on Thursday for the RBNX to cut the OCR by 50 basis points from 3% to 2.5% when it meets on March 10, if not sooner.
"The personal, economic and financial ramifications for the entire economy from the February 22nd earthquake are becoming increasingly severe as more information comes to hand," Turner said in a note published on Thursday morning.
"At a time of national crisis, when the underlying economy is already proving frustratingly weak, a rate cut would potentially be very helpful to the recovery of the economy," she said.
"Prior to the earthquake, the RBNZ had already flagged the possibility of an OCR decrease over this cycle should domestic conditions continue to deteriorate. This followed a raft of underwhelming data, which indicated economic activity stalled over the second half of 2010."
The government faced much higher rebuilding costs but may have to a run a tighter fiscal policy than would be ideal, Turner said.
"Fiscal policy is likely to find itself in a position where it may be tighter than ideal for the broader economy, and monetary policy can provide some offset."
Markets pricing in cut
Financial markets are pricing in a 60% chance the Reserve Bank of New Zealand will cut the Official Cash Rate at its March meeting, ASB chief economist Nick Tuffley said on Wednesday.
In a comment piece on Wednesday looking at the possible economic effects of Tuesday's 6.3 magnitude earthquake in Christchurch, Tuffley said ASB was itself placing a 35% chance of a 50 basis point cut in the OCR "in the short term". The OCR is currently 3%.
"The devastating earthquake is a further hit to an already weak economy, not to mention the personal toll," Tuffley said.
"The size and scale of further destruction will push back the timing of reconstruction, adding further uncertainty on the economic outlook. We have changed our OCR call: we now expect the first OCR hike in December 2011 at the earliest," he said.
"We also place a 35% chance on a 50 basis point OCR cut in the short term. Targeted support will be the most effective way of financially helping Christchurch people and businesses – as it was after the September earthquake.
"But this earthquake has come at a time when the economy is clearly vulnerable and domestic demand is weak. We would expect that a cut would be more a response to signs the wider economy is flagging, or to give some confidence‐restoring insurance."
Financial markets had reacted sharply to the earthquake, with short‐term interest rates falling around 20 basis points by the following afternoon in choppy trade, Tuffley said.
"Expectations of OCR increases over the coming 12 months have been reduced from around 50 basis points to 25 basis points, and markets have now priced in around 60% chance of an OCR cut at the March meeting. Given the scope for an emergency rate cut, we suggest keeping an eye out at 9am each morning over the next week.
"However, the RBNZ will need time to assess the situation and the implications and we do not expect any knee‐jerk reactions," he said.
The case for cutting was more “why not” than anything else.
"For Canterbury, targeted assistance from government and banks will be most effective," Tuffley said.
Here are the latest comments from ASB economist Jane Turner on Thursday morning:
The personal, economic and financial ramifications for the entire economy from the February 22nd earthquake are becoming increasingly severe as more information comes to hand. At a time of national crisis, when the underlying economy is already proving frustratingly weak, a rate cut would potentially be very helpful to the recovery of the economy. We expect the RBNZ to deliver a 50 basis point rate cut at the March 10 meeting, if not sooner.
The Christchurch CBD faces destruction far beyond that experienced in the September earthquake. As a result, the level of disruption to economic activity will be far greater. Cantabrians face a massive challenge in restoring their region following February’s earthquake. The damage to infrastructure has been greater than the September 4th earthquake. The CBD is going to be out of action for a very long time, with buildings collapsed and others still threatening to fall.
The details remain sketchy, and NZ continues to face huge uncertainties. But we can conclude that this earthquake will take a larger toll on both Canterbury and the wider national economy. The financial cost is likely to be much higher than the September quake. Much of it will be insured. However, there will still need to be a large diversion of private and public funds and resources to the Canterbury region. The cost to the Government is likely to be much larger, at a time where the economic back drop is posing challenges to the Government in meeting its Budget. Fiscal policy is likely to find itself in a position where it may be tighter than ideal for the broader economy, and monetary policy can provide some offset.
Prior to the earthquake, the RBNZ had already flagged the possibility of an OCR decrease over this cycle should domestic conditions continue to deteriorate. This followed a raft of underwhelming data, which indicated economic activity stalled over the second half of 2010. GDP data showed the NZ economy contracted in Q3, and the recovery in the labour market show signs of slowing more recently. The continued weakness in credit growth is also of concern, as households and businesses remain focused on paying down debt.
In addition, inflation indicators point to inflation pressures being contained for now, suggesting the RBNZ still have breathing space on the inflation front at the moment.
Overall, the patchiness of the underlying activity in the NZ economy means that continued monetary policy stimulus is appropriate. The latest Canterbury earthquake adds to this uncertainty, and suggests lower interest rates would be helpful to the recovery of the economy.
Here are comments from ANZ's Khoon Goh
- Early estimates of the direct cost of the earthquake in terms of destroyed infrastructure and buildings are in the range of $5 to $12 billion. It is likely to be at the upper end of this range, and this comes on top of the $5 billion bill from the September quake.
· The near-term impact on the economy will be significant. As a starting point, we are assuming a minimum 0.5 percent hit to Q1 GDP growth, but this is based on some fairly conservative assumptions. Numbers closer to 1 percent seem more intuitive. Adverse effects on confidence could exaggerate this further and impact on Q2 as well.
· The rebuild effort will be huge, but it will be significantly delayed, protracted (five years plus), and stymied by resource shortages. Not everything that was destroyed will be rebuilt.
· Our expectations of the economy being at a turning point in Q1 2011 have been pushed out by six months. We are back to square one in terms of the rebuild effort. There will again be significant unavoidable bureaucratic delays to getting work underway, although having experience and people on the ground from the September quake should help. Instigating a state of emergency signals a faster response time.
· The broader impacts on the economy (nationwide confidence, net migration, resource shortages, insurance industry responses, asset values, tourism) are much more difficult to estimate. But they will be negative, substantial, and long lasting.
· The financial burden of the earthquake will be massive. The Government will return to surplus much more slowly. A credit downgrade seems inevitable, though we are talking about margins of excellence in terms of AA versus AA+ (foreign currency rating).
· We are encouraged by the coordinated responses we are seeing. But this must be viewed in context of the need: this event is bigger than Ben Hur. Watch for business sector initiatives to support fiscal policy too.
· Fiscal policy and aid on the ground needs to do most of the work in regard to responding to Tuesday’s events. We expect a sizeable package next week. Immediate attention needs to turn to microeconomic policies that could assist in helping the reconstruction effort. This includes greater incentives to get people into skilled trades.
· Monetary policy plays second fiddle to fiscal policy in events like this, but should still do its part. The RBNZ has every justification to cut the OCR. We believe they should cut rates by 50bps, with at least 25bps of this coming at the March Monetary Policy Statement. We see little prospect of policy restarting a process of normalisation until 2012.
· Financial markets have responded quickly and appropriately, with the exchange rate and interest rates down sharply. We expect to see the yield curve steepen further.
Here's the view of Shamubeel Eaqub from NZIER.
· Damage not yet quantified (it will be sizeable, in excess of $5b from my contacts)
· Christchurch and Canterbury are a sizeable portion of the economy (15% and 11% of national employment respectively)
· Daily lost production in Canterbury is equivalent to around 0.15% of quarterly national GDP (Christchurch is around ¾ of Canterbury employment)
· Rebuilding would have peaked around 0.5% of quarterly GDP, which is now delayed
Policy response to EQ
· Monetary policy would have little impact, the problem isn’t interest rates. Lower interest rates will not fast-track safety checks, insurance assessments and payments or rebuilding. Could instead reduce NZD and raise tradable inflation.
· Better for the RBNZ to wait and assess the situation. Waiting a month will not have a material impact on policy traction (which is pretty small at current low interest rates)
· We prefer a more targeted fiscal response through welfare for households and businesses, and accommodation supplement type payments for mortgage and rent relief.
Implications for fiscal position
· Government will face additional costs (as yet quantified)
· But credit rating outlook unchanged as additional spending would probably see net debt peaking at around 35% of GDP, still low compared to peers
· Government can also re-prioritise projects, impose higher EQC premiums and impose one-off levy like Australia following QLD floods.
(Updates with Thursday morning update from ASB, ANZ view, NZIER view, links)
60 Comments
Josh I beleive the solution could be by Govt using its Emergency Powers to raise an Earthquake Levy , say 1% of payroll or alternativley raising money by way of issuing Earthquake Reconstruction Bonds with a 2% face value.
This is a more focussed approach , rather than loosening monetary policy which is quite unfocussed
REMEMBER , YOU SAW THIS IDEA FIRST ON INTEREST.CO.NZ
FT comment.......2011 is one of recovery? looks less and less likely..........OCR drop looks more and more likely....but balance that against going fixed for a guarantee for a fixed cost in this turmoil/mess...........Saudi cant up their production to match Libya's collapse....so $2.50 a litre? $3?....
"The strife in Libya is a good reason for investors to go “risk-off”. There are many others: high levels for fiscal deficits, inflation and debts, freakily low policy interest rates, poor global co-ordination, possible Chinese property and commodity bubbles, and even an earthquake in New Zealand. Scary stuff, but where can safety-searching investors go?"
Cash........
regards
Cutting the ocr...great way to discourage saving isn't it....cheaper credit for longer to solve a mess caused by cheap credit for too long....ocr at record low for how long now and what growth has been the result?
Why keep money in NZ$ if the deposit returns are below inflation and you get taxed on the little you get. Why be a sucker saver....allowing yourself to be used and abused by a system that sees big borrowers and monster debts as important to protect.
Could alway send it to a US Bank and get less than1% or thereabouts and carry the exchange rate risk?
Bank of America ratesas per their website for 12 months appears to be 0.60% for 12 month CD (Certificate of Deposit)
Were you a sucker when about 3 years ago when you could have got deposit rates circa 9% for Trading Bank term deposits (just before rates plunged) and the floating mortgage rate was circa 10.25%?
Big borrowers and Monster debt holders back then could have been feeling like they were the ones being abused by the system?
As I have been saying for a long time now, there will be a 100% chance of an OCR cut this year. The earthquake is a convenient excuse IMHO. The money supply must keep expanding or the Keynesian economic system stops working. That's just the way it is.
Also, would warn anyone who has cash in the bank. Saving is futile as it will be impossible to outpace inflation. You will loose. Also if the property bubble bursts, do you still think that NZ banks are safe?
I'll bet a lot of Christchurch people wish they had 'cash in the bank' now, rather than anything else, whatever the interest rate or inflation rate might be. Cash gives a person choice; instant choice. Anything else, even gold, has to be sold to someone else who wants to buy it before it can be used in our modern world.
My best mate's two girls were in a fairly new apartment in Christchurch which has been badly damaged. They've moved out already. All they had to do was find the cat (done) and throw their stuff into some bags and suitcases. Mum and a couple of army boys helped carry the stuff to where the car was parked and away they went.
The poor old landlord won't have it so easy. What are the odds he'll get back what he paid for the place back in those dimly remembered bubble years? Let's hope he has some cash in the bank, rather than just a mortgage and other debt. Not a great time to be counting on the value of your "assets".
This isnt a Keynesian economic system at all....and pretty much Keynesian hasnt been for 30+ years....funny thing that....its been mostly a Objectivist system with a monetarist / laissesz faire / flavour if anything and its actually failed worse than the Keynesian flavoured system we had before that.......
So what we are seeing is the libertarian or right wing types trying to claim its the "socialists" fault over the last 30 years that has caused this disaster, I guess its one of chant it long enough, loud enough and convincing enough and someone stupid might just believe it.........
regards
The capital flight is a given if Bollard cuts AE. Trying to encourage saving to grow while stealing from those who save is pure madness. Inflation now 5% plus. Yes you can get that in a term deposit but take off the tax and see where you are.
As for Key talking of a one off quake levy...to be wasted on yet more benefit pork to win an election?
What has changed since Monday...the economy was not growing on the cheap credit...the fiscal hole was growing on endless benefit handouts....the housing debt mountain was 180 billion...housing was seriously unaffordable...the tradeables sector was not and will not bail out the unproductive state sector which was bloated then and will be bloated in 5 years time.
The whole state machine was and still is geared to protect the banks.
If we see anything..it will be an effort to use the disaster to hide the need to reform the economy. Buggerising around will continue.
I agree with you Wolly, i think the OCR will not make much difference to the banks cost of borrowing. I see oil is up alot and we already had a %27 increase in oil before this latest spurge. I worry about a run on our currency and a huge increase in interest costs. Greece is back to riots,the middle east is a mess and the USA is going to be crippled if oil prices stay up or even go higher. Commodities are under pressure. I wonder how long till the Chjinese move into the insurance market it would be a great use of their reserves. I always lose when I deal with insurance companies. Its like crashing a new car and expecting to be better off after the insurance comes through.
http://finviz.com/futures.ashx
Equities are flat just prior to the open after being higher in after hours trading. The dollar is down, bonds are higher, oil is adding onto huge gains, gold is pushing higher above the $1,4000 mark, while food commodities are being slammed backwards.
....smells to me, as far as the banks are concerned, "privatise the gains and socialise the losses" ...savers get it in the neck again and these savers are the ones that showed personal fiscal responsibility over the 2002-07 period..... well Jane Turner et al you will see a substantial sum of money cross the Tasman from where I am sitting.
I truly think the only thing you bank economists and banks themselves understand is when you/they are PERSONALLY hit in the pocket themselves, otherwise all their "gobbledy-gook" is just plain semantics .....
ps - sympathies and kind thoughts for those in CHC
The only reason why ASB want a cut in the OCR is so they can lower their interest rates and in turn encourage more people to borrow whether it be for Mortgages or what ever.
I cant see how lowering the OCR will help, but on a personal level I am in favour of it as it will / could make my mortgage cheaper and the NZD will weaken against the GBP.
Damage , you are correct , a lower OCR could return to haunt us later. Its an unfocussed reaction to a major crisis which is fortunatley localised .
We need to thnk outside the square.
I think the idea of raising capital by way of Earthquake Reconstrcution Bonds , even compulsory ones ( say 2% of payroll with a 2% face rate ) is a better more focusssed approach than a blanket appraoch where the OCR is reduced .
A lower OCR could stimulate the wrong things , and frankly Kiwi's are so cautiuos right now they will use the "windfall" to keep paying doen their debts
lower or hold OCR would encourage some lending, and give current home owners some breathing space
i doubt ppl will rush to buy a new house simply because of a 0.25% or 0.5% drop in OCR while the market looks flat with a downward trend (even in Auckland).
tax free on first say $5000 savings interest income to encourage saving.
issue reconstruction bonds, interest tax free.
The point is not about kneejerk dropping OCR now, it's about repair the damaged caused by last year while Bollard had every reason to hold OCR yet still raised twice in a row anyway. Had he hold on till aug/sep for first rise we probably be in a better place now, with OCR at 2.75%/3% and little pressure to drop.
Frankly the Bank's like ASB could reduce their margins on floating and short term fixed rates compared to the current OCR rate... the acting CEO recently said the banks increased profit has been helped by the bigger margins they have been able to obtain while customers remained on floating/short term rates... it is not only Canterbury that is hurting ... the whole country is. While all of our sympathies are with Christchurch there could be a special provision for those that have been effected.. the only thing I have seen is the banks are offerring " a 3 month mortgage holiday" - interest still accumulates and is effectively "compounding" - next you will see the banks advise those in Christchurch the values of their homes have declined.. their mortgage has increased dramatically since the " mortgage holiday " so you are in negative equity ... the bank will then take action against them.
Perhaps the bank's could cut all staff bonus's, salary increases and donate increased profits to the Christchurch relief funds ??
Unfortunately a rate cut will not lower banks funding costs and so little will be passed onto borrowers (neither will it likely adversely affect despitors). The world has changed since the GFC and central banks have much less control over interets rates. A rate cut will by symbolic and not much else, but maybe for the moment that's enough ?
interested observer
if you understand the way banks have to dynamically provision for bad, or increasing bad debts, you'll understand that nominally higher bank margins have not increased their profits - most are either flat or down.
Or are you just an uninformned popularist ?
But you'd like the tellers to have their wages cut, or not increased ? why are banks different, why don't we make that the plan across every industry and wages, including your own ?
Grant A
spoken like a true loyal bank officer....
My understanding is that banks, other than Kiwibank, have reduced their bad debt provisions and once again, other than Kiwibank, have announced increased profits for the 6 months to December 2010. ( or perhaps I have read it all wrong).
The comment about bonus and staff salary increases was said somewhat tongue in cheek.. however I can see how a stressed bank officer could interpret it the way you have ... my appolgies....
You might be surprised how little of actual $$ are sent across the ditch to their Assuie owners.
Most profits are retained in NZ to fund the operations here.
Seen the amount of invest in branches and other technology which is going into Banks at moment.
In my town three banks with 3 minutes walking distance are having or about to have major refurbishments employing NZ builders with NZ products.
Sounds like you like the idea of Kiwibank, owned by the tax payer , has made reduced profits as it is having to write off losses due to poor lending or events outside its control. Why is Kiwibanks provisioning going up when other banks provisions are going down. Maybe its something to do that its a new bank and hasn't been through a cycle like this and doesn't have the expertise to deal with recoveries and realisation of securites.
I make no effort to hide that observer, but I'm equally happy to critcise them when appropriate, in fact below. All that's happened here is that bank margins have gone back to where they were prior to the 2004 - 2007 boom time when bank margins were slashed during a ridiculosly competive lending boom that was part of the problem that lead to the GFC (not excusing the borrowers who actually made the decsion to borrow) but banks should have looked at the bigger picture far earlier.
Yes bad debt provisions are starting to come back in the past few months, and hopefully soon funding/costs that they have to pay will as well. That's good news for borrowers because eventually that will lead to somewhat lower margins again (not back to the old levels for many years) when competion resumes again - there are some early signs of that in the past few months.
With the fall in the NZ$/rise in the price of oil in the past few days there must already be at least 10c waiting to go on the price of petrol - the only thing stopping that is the retailers wanting to hold off for a few days post the CChurch earthquake.
But what a grand idea - slash 1% of interest rates, see the NZ$ crumple and petrol shoot up even more!
You cant get relief from higher food and fuel....they are a function of supply and demand and supply is constrained. Ppls and Nations need to adjust and it seems they need an incentive to do so before the real price increases start...
Loan repayments for households isnt the problem, mad speculation with cheap credit is....
regards
There would be a run on our currency, why would you leave your money here, when Aussie rates are so attractive. If our $ was higher Im sure that would be happening now.
Also many older folk live of their saving and you would be forcing them to spend capital or sell shares etc. Not everyone borrows money.
Wolly's dead right - a rate cut will drag the Kiwi dollar lower, but will make minimal impact on the rates that banks lend at because they do not fund themselves off the OCR.
Bigblue, understand, a rate cut will almost certainly increase costs for consumers when they can least afford it so be careful what you wish for...if only it was that easy
Bollard might do more good if he raised the rate!...the Kiwi would perk up and fuel would drop in price. That would help hold down food costs. It would be less costly to produce export goods. People would be encouraged to save in NZ and capital would flow in not out.
and we would stuggle to increase our exports with a higher NZD which we need to pay for those cheaper imports which would result from a high NZD. If importing goods is cheaper than producing on domestic market then it will effect our current account, flowing onto credit ratings, cost of funds etc.
Businesses would have increased debt servicing costs which would further increase prices.
Unemployment could increase, reducing the tax base further and then capital would flow out on all the outbound flights across the Tasman filled with Kiwis looking for jobs.
Jeff Rubin explains why the oil price is where it is (without Bollard even thinking of making it worse by torpedoing the NZ$):
http://www.theglobeandmail.com/report-on-business/industry-news/energy-…
@Billy , wolly , etc Precsiely , dropping the OCR will not make one iota of difference to the average Kiwi business or household, because they will not see the cost of borrowing drop at all .
The banks lending rates bear no relationship to the OCR because their Weighted Average Cost of Capital is influenced heavily by overseas interest rates .
Lowering the OCR will only damage domestic savers and discourage savings and capital formation
Only the Aussie Banks will gain from paying lower nterest rates on deposits , resulting in increased profits which will go over the Tasman as dividends . NZ will suffer .
Jane Turner is , frankly , way off on this one.
I wonder what hat she is wearing witth such idiotic suggestions ?
too true Boatman..
agree with your earlier comments re dividends ... look at ASB sent more dividends to Aus a couple of years ago (more than the annual profit) - my point is consistent - the bank's have done nothing to help the average Joe since the GFC let alone the small businessman.. so why would they help a national crisis... in the meantime we xonrinue to pay for their extremely bad lending decisions while they took huge bonuses in gratitude payments for the huge profits they returned to their shareholders... and yes all of that went over the ditch and any reserves just in case. When times get bad just put in a "paper figure" of bad debt provisions and reduce tax liability .. but still have shareholder dividends.... think they call this commerce
its absolutely amazing that our regulators allowed the Aussies to control our roost. the first rule of business is maintain control - no matter what. Whomever authorised the sale of these entities was a total lunatic. Kiwibank is an afterthought and extremely unprofitable. ROE is bugger all.
The Aussie banks compounded the GFC by shutting up shop and accelerating the finance sector collapse. Now they pounce on the same space - all have subsequently formed subsidiaries speciallising in asset finance - with Kiwi Asset Finance announced today. More profits now will move offshore. At least Hubbard ploughed SCF equity back into NZ (notwithstanding investment decision)
We have blown this economy apart. All of our eggs are in one basket. Commonsense would have suggested that onshore (NZ owned) financial institutions should have grown, and the brakes put on the Big 4 assie banks. But oh no we do the reverse. Even CHCH is at the mercy of Suncorp and its reinsurers. We are forked!
GFC was just that. A Global Financial Crisis which resulted for a period of time in the capital markets being closed for business hence that Banks had no access to that cheap funding they had in the past and simply struggled to have funds to lend.
The RBNZ has now introduced the Core Liquidity Ratio which put far more relience on domestic funding which has been a reason why deposit rates have moved at a higher rate upwards then the ORC. The mortgage war of the 2002 to 2008 has been replaced with the deposit war of the 2009 onwards.
Banks now have to look for more at their funding positions than in the past.
As for finance companys in many ways they were authors of their own demise with interparty lending, capitalised interest (no cashflow) and funding assets offshore like in Fiji. Many directorts and owners treated their finance companies as their own private ATM's to suck out as much cash as possible for their own and mates use.
cash rate up a down a point or two ... who cares... its myopia on a grand scale.
The clincher for the global economy and thus for NZ is rapidly rising oil prices. We are close to a level which takes both back into recession.
Question is... how come when the IEA, Lloyds of London, US Military and heaps of other credible bodies have been warning of another looming oil shock.... our polliticians and media have pretended there is no problem..
In an election year hard questions need to be asked as to why these clear and urgent warnings have been ignored and not shared with the public, and what policies the main parties have to urgently lower our oil dependency, and to plan for an imminent oil-induced recession.
interested observer agree with what you are saying.
Banks are only interested in one thing shareholders returns.Are the banks saying they will cut their rates accordingly. Everytime the ocr was lifted .25% banks were lifting floating rate .75% each time so I assume they will do the same in reverse? Don't think so.
As for the so called mortgage relief package in place last earthquake interested observer right there were very tight rules around any restructuring for individuals, and there was definitely a finite period for borrowers.
If banks want to enact their feel good brands give individuals whose lives and homes have been destroyed a total break from their financial situation without compounding interest. Put their money where their mouths are.
Yeap have three friends walking away from there houses and handing them over to the bank, This is what the banks are worried about people cant cope with the nightmare of EQC practices and red tape between them and insurance companies. They are scared, there families are scared and they are walking away from there homes, the values are a qaurter if not less...the banks cant afford this to happen..The OCR will not go up anytime soon.
I understand the emotion being from Canterbury and living through it however it is not non-recourse loans in NZ, they will go bankrupt. Bankrupty has a stigama that also effects professional certification and wider consequences for people than just the bankrupty process in NZ. For many of the infromed it an't an option.
This was explained at a meeting with Ministers yesterday and target assistance is being workered through.
Yes more was discussed at the meeting, you had to be there, didn't see media so expect no link. No point going into specfics until the Government makes the final policy decsions. Just highlighting general vein of topic.
Unless you have in demand skills a lot of people really will struggle in the current world economy to set up somewhere else.
Just checked it was a closed meeting, I went along as a advisor at the last moment for a influential group. I know some of the details are not in the public domian and suspect it would hinder the process if released at this time. Concerning Ministers a number turned up that had not been in the media and I was not even aware were down. I think it is fair to say the Cabinet is really hustling on this one.
This is why the government needs to set in place an arrangement with the mortgage lenders regards mortgage holidays for affected borrowers. Legilslate for it if need be. At the end of the day - the EQC and insurance companies will likely have to write off the houses and banks/lenders will be repaid what is owed, or what is available if the payout is less than the mortgage amount.
People should not have to continue to pay mortgages (and rates) for homes they can't/don't want to inhabit in the longer term. Nor should they have to wait for structural assessment (red tape). They deserve to be able to begin their lives again, with their existing credit worthiness intact.
Agree Kate, how can you expect these people pay for something that has no value what so ever. They need to hold these mortgages until insurance etc is worked out, the message we got after Sept 4th be between 2-4 years to rebuild, that had not even started,50 percent of the homes had not even been assesed then, people where running out of money paying mortgage and rent, this time the damage is far far worse so some sort of intervention needs to happen this time.
I feel quite desperate for the many people who just don't need this stress - who need to get on with their lives. I pray that the government does not hold up their lives and place their families in undue risk simply to satisfy the requirements of the banks. I am certain this will be addressed - it is the only humane thing to do.
A six month mortgage holiday - its a simple concept, easy to legislate for. It needs to be done.
Perhaps this awful ongoing event will drive home to Kiwi the very real truth that borrowing most of the value of a property is a silly thing to do. Not only do you risk losing your equity but you carry the can for the debt regardless of disasters...you are stuck with the mortgage.
Mr Bollard should come forward with a clear statement about Monetary Policy as soon as now. The turmoil caused by some banks presuring for rate cuts have only created instability. IMHO their main drive is to make a buck trading the destruction of the NZD than helping in the reconstruction or a genuine interest in asisting those who lost it all to the EQ. A levy is the way to go about it.
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