A review of things you need to know before you go home on Tuesday; home loan affordability updates, housing confidence bounces back, Kiwibank likes the outlook, swaps unchanged, NZD firmer

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

No changes to report today.

None here either.

The national home loan affordability measures are unchanged in April from March. But there are some notable regional movements. In Auckland, it now takes 43% of household take-home pay to pay the mortgage on a lower quartile house, down from 46% a year ago. (On Auckland's North Shore, it is down to 51% from 56% a year ago). Only Taranaki and Canterbury had affordability improvements for first home buyers in the past year. Northland and Waikato were little changed. All other regions posted minor tightening. But there is significant deterioration in affordability happening in Rotorua, the Kapiti Coast, Nelson, and the Auckland zone around Rodney. However, all are still 'affordable', except in Rodney.

The ASB Housing Confidence Survey finds expectations in the housing market have improved sharply after a post-election slump, and Auckland house price expectations have hit a 12-month high.

Fitch Ratings has affirmed the credit ratings of New Zealand's four major banks. ANZ NZ, BNZ and Westpac NZ have AA- ratings with stable outlooks. ASB has an AA- rating with a negative outlook. ASB's outlook reflects rating action Fitch took on May 6 on ASB's parent, Commonwealth Bank of Australia, to reflect CBA's risk in remediating shortcomings in its operational risk controls and governance.

In Australia, they released some interesting travel commute data from their 2016 Census. It seems the average commute is 16 kms. Men commute longer than women. Generally, as income rises so does people’s average commuting distances. People with a weekly income of AU$2,000-$2,999 traveled the longest average distance to work (20.0 km), while people with a weekly income of AU$1-$149 had the shortest average distance to work (9.6 km). Of the 9.2 million commuters on Census day, 79% traveled to work by private vehicle, 14% took public transport and 5.2% either cycled or walked. In addition to those who commuted on Census day, a further 0.5 million reported that they worked from home, and 1 million employed persons did not go to work on that day.

In Australia, the Financial Services Royal Commission is rolling on, looking at bank lending to small businesses. The core line of inquiry seems to be that banks have a duty to ferret out bad business plans and not lend on them, even if they have adequate security. The hearings continue with a stream of witnesses whose business failed blaming their bankers.

Kiwibank economists like what they see when looking at the New Zealand economy. In a review out today, they say: "Global growth has improved, led by developed nations. Trade wars represent the biggest threat. Locally, the Kiwi economy is in a bit of a sweet spot. Growth is close to trend, the fiscal position is strong, and interest rates are low. Inflation, particularly foreign inflation, is weak. Wage inflation is the key, and likely to strengthen. With Kiwi interest rates expected to stay well below US rates, the Kiwi dollar can provide some support."

Keep an eye on Turkey. Things are getting dire, economically. They owe US$400 bln plus in debt, but their currency is/has collapsed, falling sharply again today. They have no way to service that debt. Locally, 42% of voters surveyed think it is all part of a plot to undermine the country. Apparently they blame "George Soros", the current Turkish method of blaming the Jews for this financial mess. There is an election on June 24. Rising debt and fast rising deficit spending are apparently nothing to do with evaporating confidence the Turkish economy is on a sustainable path.

Local swap rates are little changed today, with only a -1 bps slip for durations of four years and longer. The UST 10yr yield has also slipped -1 bp to 3.05% today. The Aussie Govt 10 yr is still at 2.87% (unchanged). The China 10 yr is at 3.68%, down -4 bps. And the NZ Govt 10 yr is down another -2 bps at 2.84%. The 90 day bank bill rate is unchanged at 1.98%.

The bitcoin price is now at US$8,294 which is down -2.1% from this time yesterday.

However, the NZD is firmer at 69.5 USc. We are little changed against the Aussie at 91.6 AUc, and up slightly against the euro at 59 euro cents. That has the TWI-5 at 72.3.

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End of day UTC
Source: CoinDesk

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"Mr Khoury said many (customers) were not sophisticated students of bank contracts and responded with "horror" when confronted with the knowledge the banks can vary the terms of the contract almost at will." (from the Aussie Royal Commision, yesterday)

And lo and behold, what did I get from our Banking Ombudsman, also yesterday? ( yes, I'm still at it!)

"Changes to facility : Point 3.3 .The Bank may also amend the terms of this Agreement or Letter of Advice without having to obtain your further agreement. We will send you a confirmation of any changes at least 14 days before the relevant changes take effect"

I'm sure readers will all be aware that Banks can and do make changes that they have little choice but to accept. But is that acceptable? It is hard to understand how clauses like that don't render a contract void for uncertainty as to the terms of the contract. Surely, any clause that is unfair, that is, “cause a significant imbalance in the parties’ rights and obligations”, can be struck off the contract? Time will tell. But if Clauses such as those highlighted can be 'struck out' then a World of Financial pain is headed 'our' banks way.

This is embarrassing:


People talking about property investment as magic really annoys me.

It’s possible there is an investment that will provide income > costs and a capital gain over time but I expect you have to work very hard to find that magic opportunity in NZ right now.

Whereas paying down your mortgage gets you 6-7% compounding per annum tax free.


If hypothetically there was an investment that had greater greater returns than other investments people would buy that investment raising the price until it’s returns were equal to the next best investment. Presenting property as a perpetually superior investment and using past returns as proof is a scam.

That appears to be a paid advertorial and should have been disclosed as such.

I think it's very good, sound advice. I wouldn't be where I am now if I didn't do what he advises. Have you tried it Hardly?

I did the opposite. I’ve been paying down my mortgage. I’m at about 75% equity.

I’ll admit I should have put more into KiwiSaver instead of just doing the 4%.

But just because I might have done the wrong thing in hindsight (it is debateable as I’ve minismised by risk), it doesn’t mean it is the wrong play for the future. I think a guaranteed 6% tax free from paying down your mortgage is a great return for the next 5 years of uncertainty.

Well done for reducing your mortgage to 25% Hardly

It's why the herald doesn't have a comments section.

They recycle this tripe from Australia and pretend it holds here.I'd be surprised if it holds true in Sydney.. with prices there, and recent corrections in prices plus much more differential pricing for investment property loans.

Paying down debt in a low interest environment is financial gold. Getting out of debt will return more than savings... and unless you're very good at picking up an undervalued rental property with a good yield, it will be hard to beat. Or, you can use all the equity (which is merely paper equity) and stretch yourself to be rental reliant since you use all your income to top up the shortfall. #wealthtip

Grant Robertson is supporting a white elephant Stadium which will be empty 90% of the year. Maybe if the Stadium is spec'd with reclining seats it can be used as affordable housing.

Fix the rotten hospital? Fix housing? Trains? Nope what we need is a flash stadium for grown blokes to play hand-egg.

With all this stadium planning have we considered that the popularity of our major sports, particularly rugby, is in decline?

Yeah, I cannot believe how tone deaf this whole stadium shambles has been. I have zero interest in making a financial contributiion to that turkey. This is goffs biggest mistep since he became mayor. The review cost $900k and can only be read in hard copy under the control of the mayor. I get the feeling he now finds the whole thing a complete embarrassment. Eden park is a dog into which ratepayers have poured vast amounts of treasure, disgraceful

Will not be able to travel soon....nor buy a house....once they have taken all your dosh...

So boycott...this....rip-off....economy.....(Economy...I do not think so,,,compare...you have been mugged).