What happened Wednesday

A review of things you need to know before you go home on Wednesday; Westpac raises credit card rates, mortgage market jumps, Graeme Hart's junk, real national savings, swap rates flatten

26th Nov 14, 4:00pm by David Chaston

For Wednesday, November 26, 2014. <a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

Here are the key things you need to know before you leave work today.

TODAY'S MORTGAGE RATE CHANGES
Today, TSB Bank made some changes. It tweaked its 6 mth rate down -5 bps to 5.80% matching the market. It also cut its 4 yr by -25 bps to 6.40% and its 5 yr by -35 bps to 6.50%. And late yesterday, the Co-operative Bank took just -1 bp off its 1 yr rate to 5.69% and -10 bps off its standard 2 yr rate to 5.99%.

TODAY'S DEPOSIT RATE CHANGES
There were no changes here today.

CHARGING SUCKERS
Westpac is adding between 0.5% and 1.0% to many of its credit card interest rates. It announced these today and they will be effective on December 2, 2014. That will make the standard 'purchase' credit card rate 20.4% and the standard 'cash advance interest rate 22.95%. With just about all other interest rates falling at present, it is unclear how Westpac can justify these rises. The market will judge. Shareholders will be happy however. Kiwis use of credit cards is growing strongly at present and about two thirds of all balances incur interest costs.

MORTGAGE MARKET JUMPS INTO LIFE
The mortgage market has suddenly jumped into life. Having basically missed the normal spring surge, things heated up last week. There were 6,617 'new' approvals last week, a jump of +12% over the equivalent week a month ago, and +14% up in value terms. In fact, the value of approvals are now higher than the same period a year ago and this is the first time this has occurred in over a year.

HIGH LVR LENDING FALLS
High LVR lending in October was 7.1% of all lending "after exemptions". This is a small reduction from the 7.3% in September. The limit is essentially 10% so some banks might have been bumping up close to these limits. We saw Kiwibank confirm it was pulling back from high LVR loans earlier this week.

BIG FINCO PERFORMS WELL AGAIN
Listed Dorchester Pacific has reported half year results that were ahead of their guidance. That made $5 mln profit in this half year, compared with $1.85 mln for the same period a year ago. Recently acquired Oxford Finance performed especially well, they said.

JUNK GETTING JUNKIER
Graeme Hart, owner of the giant Reynolds Group, is not only our wealthiest man but our most indebted also. His Reynolds debt is junk (Moody's B3) and Moody's have warned they are looking at downgrading them.

A REAL IMPROVEMENT
The government is boasting that New Zealanders have now had a positive savings rate for five consecutive years, according to the latest Stats NZ National Accounts out last Friday. Actually, ignoring the politics of it, it is a creditable achievement given the negative national savings rates that preceded it. It had been negative in the 15 years previous.

'ENDURING PROGRESS'
The latest NZIER quarterly predictions out today said our economy is growing, but the pace is moderating. Economic growth will average 2.5% in the next five years, after a strong 3.4% in 2014. One-off boosts are fading, but there is a durable underlying recovery taking place that is not built on fickle borrowing.

PEER-TO-PEER INVESTING OPPORTUNITIES
We launched a new monitoring service today for investors, revealing the types of loans they can invest in on the Harmoney peer-to-peer platform. This service will expend to other platforms when they are launched. peer-to-peer platform businesses are gaining in popularity these days.

WHOLESALE RATES
Swap rates fell and flattened today even more today. They were down -1 bp for one year and up to -5 bps for 10 yr terms. That is a sudden flattening and follows similar moves on Wall Street this morning. In fact the 1-5 curve is as flat today at +38 bps as it was in November 2008 at +36 bps. In 2008 it was moving from negative to positive. Today it is moving the other way although it is not yet negative. The 90 day bank bill rate was unchanged at 3.67%.

OUR CURRENCY HOLDS
Check our real-time charts here. The NZ dollar fell again against the greenback and rose again against the Aussie. It is now at 78.2 USc, at 91.5 AUc, and the TWI is at 78.0.

You can now see an animation of this chart. Click on it, or click here.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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4 Comments

by Stephen L | 26th Nov 14, 7:50pm 1416984607

You have to laugh at Bill English talking up household savings, without him mentioning that the main cause of this has been the government fiscal deficit. The fact his government has had the most sustained deficit since the 1980s is absolutely correlated with why there has been sustained household savings.

Household savings = Government deficit - current account deficit.

Household deficit = Government surplus + current account deficit.

I'm not sure this truism is widely known, or otherwise perhaps the populus may not be as keen on a fiscal surplus as they often seem to be. Bill English surely knows it, though.

The equation can be why over worrying about a fiscal surplus can be a false priority, and why the current account is the more important measure.

by Stephen Hulme | 26th Nov 14, 9:40pm 1416991234

Thank you Stephen L - I also noticed Mr Chaston was sparing with what was lifted from the NZ Stats press release,

Echoing your reality based analysis.

Despite the increase in national saving, investment exceeded domestic saving in 2014. As a result, New Zealand continued to borrow from the rest of the world to fund investment.

If one can call it that.

Investment grew strongly in the March 2014 year, led by residential building and other construction. “Investment in fixed assets reached a new high of $50.9 billion in 2014,” Mr Dunnet said. This was a key driver of the increase in gross domestic product, which brought the size of the New Zealand economy to $231.0 billion. Read more

by Henry_Tull | 27th Nov 14, 12:41am 1417002093

now whose banks are our banks...

Banks are quietly introducing enforced month-long waiting periods as they bow to regulator pressure from Australia.

http://www.stuff.co.nz/business/money/63560905/shock-in-store-for-term-deposit-savers.html

Kiwibank was alone among the big banks in rejecting the move because it was not Australian-owned.

by Stephen Hulme | 27th Nov 14, 9:03am 1417032188

Hmmmm- I guess this was in part triggered by the probable short term nature of this type of Aussie bank funding.

Australia's big four banks are tipped to raise $134 billion from wholesale markets this financial year, the most since 2009-10, as lenders use cheaper global funds to fuel domestic competition.

Banks are also using wholesale markets to fund some of growth in new lending, which is being driven by the $1.3 trillion mortgage market.

New borrowers are benefiting from the trend, because banks are passing on the lower costs to their customers via deep discounts in their advertised mortgage rates.

For savers, however, it is less positive. The growing use of cheaper wholesale funding has weakened competition among banks to secure household deposits. This is pushing down interest rates on products such as term deposits. Read more

Saving is about to be a thing of the past - banks can access QE generated funding, hence the imposition of harsh terms of engagement in the retail money intermediation market.