Here are the key things you need to know before you leave work today.
TODAY'S MORTGAGE RATE CHANGES
No home loan changes to report today. But in a related item, AA Finance has reduced its lowest car loan rate (its promotion rate for clients with the best credit criteria) by -1% to 9.95%. (AA car loans are supplied by Heartland Bank.)
TODAY'S DEPOSIT RATE CHANGES
No changes here either.
REACTING TO NO CHANGES
This is a report of "what happened today" but the big news is really what didn't happen. The RBNZ did not change the OCR. Although this was as most expected, there were market reactions to the decision. Wholesale rates flattened and the NZD rose. These reactions happened because markets are somewhat confused by the RBNZ's recent policy signals. In contrast, the earlier 'no change' decision by the US Fed was a much better signaled policy response. The Bank of Japan also came up with a 'no change' decision at 3pm today. They brushed aside calls for more mire stimulus. The Yen jumped.
'STILL CRAZY AFTER ALL THESE YEARS'
New housing loan approvals last week were strong for this time of year. The average approval value reached another record high of $242,000 and the growth in both volumes and values approved shows no sign of slackening yet.
FONTERRA RIVAL ON THE ROPES
Most NZ dairy farmers will know this, but others may not. Fonterra is not the only regional dairy co-operative facing a hard time. Australia's Murray Goulburn (a fierce Fonterra rival) is facing existential threats. Its business strategy is in tatters, its farmers facing ruin. Fonterra is in a much better place. It was only a few weeks ago that readers of this website were claiming the Aussie dairy farmers were much better off that Kiwi ones. Not now. An "udder disaster" over the ditch.
WHOLESALE RATES FLATTEN
For all rates to five years, wholesale rates rose and flattened following the OCR 'no-change' announcement. But while the flattening trend was strong, it only takes the curve back to the slope we saw in mid-March, although we are now -15 bps lower now. Rates at the long end rose. NZ swap rates are here. The 90-day bank bill rate rose sharply by +7 bps to 2.39%.
NZ DOLLAR RISES
Following the OCR decision today, and after markets absorbed the implications of their Statement, the Kiwi dollar has risen, albeit modestly (although the rise against the Aussie is notable). However, these rises have taken it right to the top of the zone the currency has been in all year. Through the middle of all this, the 3pm Bank of Japan decision say the yen rise strongly. The NZD is now at 69.1 USc, at 91 AUc and 61.1 euro cents. The TWI-5 is at 72.4. Check our real-time charts here.
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17 Comments
This RBNZ data reports "new to the bank". As such it will include roll-over loans that are competitively swapped around and moved. These will include many that are well into their term. "New" is not only the first time a borrower takes out a loan for their initial purchase. It will also include loans for buyers who are bringing major equity with them from a house they sold to buy their next one.
'New loan value' is nothing to do with house prices.
In that context this 'average' makes sense. But it is rising fast.
For all rates to five years, wholesale rates rose and flattened following the OCR 'no-change' announcement.
In a manner where the time value of money is no longer important or meaningful? And in truth where bank balance sheets are so constrained not a single trader is authorised to challenge interest rate swap compression by buying repo funded NZGS and receiving 3mth floating on the swap leg?
embrace the contradiction
- a parable for the AKL home loan market
https://www.youtube.com/watch?v=zWB6lY2GBjQ
It's not that the time value of money isn't meaningful it's just reversed. Every year consumer items go down in price. Even the total interest cost of a mortgage is half what it used to be. If most of the population wasn't so poorly paid this would be a new golden era, instead we're building it on debt.
Too bad almost all the spending power is being pumped into the bubble, but then what are people supposed to spend on when they have all the cheap consumer goods already?
Nikkei 225 (^N225) -Osaka
16,742.25 Down 548.24 (3.17%)
https://in.finance.yahoo.com/q/bc?s=%5EN225&t=5d&l=on&z=l&q=l&c=
Murray G.
http://www.afr.com/brand/chanticleer/gary-helous-vision-for-murray-goul…
The issue is one that Fonterra is obliged to pay its Oz suppliers the price that MG pays their suppliers. So with a raging dairy price bull in control of MG pmts and pmt forecasts we have a problem whereby Oz farmers are being paid over the odds (Fonterra odds) that is funded by the yours-truly group.
http://www.mmg.com.au/local-news/country-news/bonlac-claims-bragging-ri…
BSC and Fonterra have a supply agreement in place whereby Fonterra at a minimum must pay a milk price equal to the largest processor in Victoria.
John Key shot down a review of foreign trusts in NZ months ago after law industry lobbying
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116…
Vote buying is rife. Taxation does not come in to fair play. It is to be avoided at all....Costs.
It is a face saving facet of politicians that they can lie with a straight face about financial peccadilloes of the bent kind, if you follow my twisted logic..It appears to be mandatory.
,
It is also a facet that they can lie down with a clear conscience, where others would squirm forever over the mere hint of a lie, or corruption.. Not once, but many, many times.
As a simple observation.
Surely it should be the Inland Revenue that dictates what is best needed tax wise and the best way to go about taxation and the ruling classes, who we elect , say.....but of course, I always thought I was here to do your bidding, and that of the General Public....of course, we must, truly, yes truly must...comply for the well being of all....concerned.
But as usual....How stupid am...I....and the system is as twisted and bent as it always has been.
Twas ever thus.
We all knew Abenomics was never going to work long term, and now the commentary on the mess in Japan is starting to highlight the failure:
'Abenomics is in poor health after Nikkei slide – and it may be terminal'
'By the time Japan hosts G7 leaders this summer, Abe could be forced to concede defeat in his principal aim of dragging Japan out of deflation and boosting growth.'
http://www.theguardian.com/world/economics-blog/2016/feb/12/abenomics-s…
"AA Finance has reduced its lowest car loan rate (its promotion rate for clients with the best credit criteria) by -1% to 9.95%" This is a risk weighted rate? If i was one of their clients and had their highest credit rating and this was the best rate they offered me I'd be offended. Just goes to show how finance companies are still way too greedy.
I don't think so. Anyone buying a car (that depreciates quickly) using finance shows they are using questionable judgment, so if I was a lender I would want some risk reward for dealing with such borrowers.
Still, if you do borrow to buy a car you will pay far far less total interest at 9.95% (over 36 months) than using your house as an ATM and adding to a 4.25% mortgage (over 15 years or more). Adding to your mortgage to buy a car is one of the worst financial decisions you can make. (But your banker will love you.)
I heard a good saying from one of the directors in our finance dept the other day. "If it appreciates buy it, if it doesn't lease it". This holds so true to cars. Get a new or "manufacturer approved" used model, have them to pay the maintenance for 3 years before getting a new one. Not sure how popular it is in NZ but the Poms love it.
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