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Encouraged by the RBNZ, one major bank offers a 2.29% one year fixed home loan rate. It is almost certain to signal a new round of mortgage rate cuts that will juice up the already-hot housing market

Encouraged by the RBNZ, one major bank offers a 2.29% one year fixed home loan rate. It is almost certain to signal a new round of mortgage rate cuts that will juice up the already-hot housing market

Westpac has launched into 2021 with a sharp cut in a key mortgage rate.

They have cut -20 bps from their one year 'special', taking it down to 2.29%.

This is the first cut in a fixed rate from any bank since November 6, 2020, nine weeks ago.

But it won't be the last. The RBNZ's Funding for Lending program is in place, allowing banks to access money at the OCR's 0.25%.

If banks use that funding line, they can still keep their margins intact with rates down to about 2%.

One bank has drawn $1 bln in the FLP line late last year. $1 bln is enough to fund about 2000 home loans.

Westpac is aiming to capitalise on the housing frenzy underway. “We know property ownership has probably been a hot topic for many Kiwi families over the holiday period, so whether you’re looking to buy your dream home in 2021 or just pay off your mortgage a bit faster, this special rate could help you get there,” a spokesperson says.

“Two years ago the same special home loan rate over the same term was 4.15%. It would have cost $1,119 a fortnight to service a $500,000 mortgage over 30 years. Now, the lower interest rate means the same repayment would be $885 a fortnight – a saving of $6084 over a year.”

Their new offer is effective today, Monday, January 11, 2021.

Westpac's eligibility criteria included a minimum of 20% equity, plus salary credit to a Westpac transaction account, to be issued prior to drawdown date. These special fixed interest rates cannot be used in conjunction with any other Westpac home loan offers or discount packages, including previously negotiated offers, legal fee contributions or the Westpac Choices Home Loan with Airpoints™. These special fixed interest rates do not apply to loans for business or investment purposes.

Westpac is also reducing its Bonus Saver by -5 bps to 0.20% pa and the interest on its Notice Saver by -10 bps to 0.40% pa. Given the FLP, it is hard for banks to justify any offer over 0.25% pa.

Despite today's sharp cut by Westpac of their home loan rate (the lowest one year rate by any major), it is not the lowest one year fixed rate available. HSPC offers the same term at 2.25%, and Heartland Bank still has a 1.99% fixed offer for one year.

One useful way to make sense of these new lower home loan rates is to use our full-function mortgage calculators.

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.

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

Fixed, below 80% LVR 6 mths   1 yr   18 mth  2 yrs   3 yrs  4 yrs  5 yrs 
as at January 11, 2021 % % % % % % %
ANZ 3.39 2.49 2.55 2.69 2.79 3.90 3.99
ASB 3.39 2.49 2.49 2.59 2.65 2.99 2.99
3.39 2.49 2.49 2.69 2.79 2.99 2.99
Kiwibank 3.55 2.55   2.65 2.65 3.09 3.19
Westpac 4.15 2.29 3.25 2.69 2.79 2.99 2.99
Bank of China  3.45 2.55 2.65 2.65 2.75 2.85 2.95
China Construction Bank 4.70 2.65 2.65 2.65 2.80 2.89 2.99
Co-operative Bank 2.49 2.49 2.69 2.69 2.79 2.89 2.99
Heartland Bank   1.99   2.35 2.45    
HSBC 2.79 2.25 2.25 2.35 2.65 2.79 2.89
ICBC  2.89 2.89 2.45 2.45 2.65 2.89 2.99
 SBS Bank 3.39 2.49 2.49 2.59 2.65 2.89 2.99
 [incl Price Match Promise]  2.89 2.49 2.49 2.49 2.65 2.99 2.99

In addition to the above table, BNZ has a unique fixed seven year rate of 5.20%.

Fixed mortgage rates

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Nice timing - as just about to come off a fixed.

I re-fix in late March, more room to drop between now and then!?

Depends whether the RB moves OCR negative - might be too much political pressure now for that to happen. You can always float for another month or so and look around.

Yep, as more banks access the FLP and borrow at 0.25% from RBNZ rates should drop.

I'm waiting for the 5 year rates to drop

Not sure the FLP will impact 5 year loans -- as it is 3 year money. Wholesale on 5 years quite a bit higher than it was a few months back.

A further stimulus to the housing market.....


That's not stimulus, this is....

20 year mortgage at 0% or 30 year at .05%

Yikes, hope Mr Orr doesn't see that article.

Might give him a hard-on

Our rates are still on the high side by international standards.

Be careful comparing different countries as there are often hidden fees (package fees) elsewhere and nothing like the cash incentive hand-outs found in NZ.

As a comparison, Westpac AU 12m standard HL = 2.29% (interest only a whopping 3.89%!) and 12m TD = 0.35%. NZ HL rate is the same while TD rate = 0.80%, although for how long now?

Retail interest rates in most of western Europe and Asia are less than 1.5%.

And their TD rates are non existent. In Western Europe and Asia you dont get paid thousands to take out a home loan either as far as I know

Thousands? I got 3k from my bank. It was certainly helpful, but not that consequential in the bigger scheme of things.
I would rather have a mortgage rate of 1 5%.

so that super-annuitants get zero on their TDs?

Not going to play that game.

Not good enough, Orr wants a red hot summer market - rates need to start with a 1%!

Patience, they will

Negotiate! I got 2.3% at Bnz in November, well below their advertised one year fixed rate.
The deposit remains the key barrier for many FHBs. If you have the 20% deposit, a 30 year mortgage is serviceable for middle income earners on a new townhouse in Auckland. Unfortunately not everyone can rely on the bank of mum and dad.
I would like to see the government increase the cap of new house prices in Auckland under Homestart, to 725k. Under Homestart, a 5% deposit is accepted.
This would lead to a boom in Auckland house building.


It would lead to the exact same new builds currently being pitched at $650K being jacked up to $725K, with everything else with more land or more space going up along with it. At best, you would have added $75K to people's mortgages to buy the same number of bedrooms and the same sized houses; effectively you've made today's 30 year mortgage a 35 year mortgage with nothing to show for it.

It's almost impossible to deliver 3 bed new builds in Auckland for 650k.
It's doable in quite a few locations at 725k.
A 675k mortgage over 30 years is $600 pw. That's readily achievable for many middle income earners.

What makes you think you're going to get three bed new builds at $725K if you make that the new threshold? Chances the two beds will just get bumped up to $725K and the three beds would go up in price even higher. Nothing about our experience to date suggests anything else would happen.

I do like the idea of specifying minimum qualifiers like numbers of bedrooms etc to preserve value, but the current system doesn't work like that and just lifting the cap will simply increase the price floor we have now.

Well, they can make the limit 650k for 2 beddies, and 725k for 3 beddies. Problem solved

An increase in demand while still having supply restrictions will only lead to an increase in property prices.

Fixing price only results in stripping assets to fit the price condition. eg no onsight parking, small bedrooms, and lounges, etc, which is easy enough to do thanks to NZ pathetic building code minimums.

As already mentioned, what you are suggesting is what they did with Kiwibuild.

But one of the key reasons kiwibuild failed was that the price ceilings were too low. I know a number of developers who didn't move forward with it because they were unable to deliver within the price ceilings

Yes, agree, for many reasons Kiwibuild was not going to work. Firstly, if they keep doing what they are doing, whatever price you make it, the pricing ceiling will again be too low within one build cycle because of the supply-demand imbalance.

Secondly, the land price at its absurdly high price was baked into the cost when it was paid many months or years prior. Even if that supply is technically more than demand, it will only be put into the equation at that inflated price, otherwise, the land bankers will keep it out of the supply chain to keep the price high/er.

It's not just about supply, it has to be an affordable supply.

Otherwise, the only way you will get a reduction in prices is if someone goes bust.

... want to take a guess at what will happen to the price of four bedders? ;) If we want people to stay and live in NZ, then we need to accept that family homes over $700K is not sustainable and someone at some stage is going to have to pay the piper.

Where now do you find new build 3 bedrooms for $725k in Auckland? You'd certaintly not find anything for $650k...

Why is there an expectation first home buyers get a new house? Especially in Auckland.
The system is back to front.
The new builds - smaller, warmer, lower maintenance should be offered to the elderly - encouraging them out of their no longer needed family homes which could be better used by young families.

Isn't what you descibe rest homes?

Not quite. I am talking about down sizers - kids left home. There is a lot of under utilized housing stock with 3/4/5 bedrooms and 2 people however many older people don't want to leave the suburb they feel safe in. Some creative thinking/marketing - tailoring new build enclaves around community facilities that suit older people rather than the current models that demand car ownership to get anywhere.
I just feel the current solutions aren't working.

Those extra rooms will now be used as home office and somewhere for kids to stay when visiting.

Or accommodation for your 30+ year old son/daughters family who can't buy in Auckland or find a rental property.

I agree with the above comments. My wife and I live in a large 5 bedroom house. Interestingly when we talk about selling it's not the house she doesn't want to leave - it's the street and the neighbours - who have become friends and the convenience.
The solution is more housing - obviously - but I don't believe the government and he building industry are targeting the right part of the market - if they were it would be more successful.
My idea would also help reduce the need for reverse mortgages - an area of financing that attaches a high cost risk premium

There's plenty of up market terraces & apartments that you could purchase though right? What's stopping you from moving. The location? The lifestyle? The capital gains? The pride in owning a large home?

Hey Nifty1 - The current finance policies are designed to benefit the existing property owners - of which we are one - over those starting out.
And I completely disagree. It is wrong and unfair. Sadly it is now often about how financial is the bank of mum and dad.
But encouraging an expectation in first home buyers that a new home is normal is also misplaced.
In using myself as an example I was trying to explain some of the reasons couples don't downsize when society as a whole would benefit. So how do we find a way to allay those concerns?
We have approached our housing issues from the bottom up- it hasn't worked - why not try a different approach?
I saw a great example of this in a new suburb on the north side of Tauranga.

It seems that there's already terraces/apartments that cater for downsizers (especially in Auckland), however people like yourself are choosing to stay in their oversized houses locking out other families that could buy it. It would be interesting for you to answer my questions in my previous comments?

He said they didn't want to move due to the friendly neighbourhood. Also, your nasty accusations of him "locking out" families are laughable. You must be salty due to your own shortcomings

He's complaining there's no options for downsizers. He also feels sorry for people trying to get into the market. There's nothing worse than when someone's complaining about a problem and a solution already exists for them, they just don't want to take it.

The solution may suit you but doesn't suit Wilco. You lack perspective. He isn't the problem, either, as you suggest.

He is part of the problem he stated existed.

No he's not the problem. His situation is only a symptom of the housing problem by no fault of his own. Would you prefer he demolish his house and build a smaller one? You reek of envy

Don't think you've read his comments and what he was proposing. 'Reek of envy?' Could be smelling yourself there mate.

"however people like yourself are choosing to stay in their oversized houses locking out other families that could buy it". If not envy, then what's your justification for these type of comments?

It's basically the narrative of the problem he described. He's got a 5 bedroom home, just him and the wife. And even given his suggestion, he himself doesn't want to move. His comments "I am talking about down sizers - kids left home. There is a lot of under utilized housing stock with 3/4/5 bedrooms and 2 people however many older people don't want to leave the suburb they feel safe in. Some creative thinking/marketing - tailoring new build enclaves around community facilities that suit older people rather than the current models that demand car ownership to get anywhere". My wife and I live in a large 5 bedroom house. "Interestingly when we talk about selling it's not the house she doesn't want to leave - it's the street and the neighbours - who have become friends and the convenience."

"It's basically the narrative of the problem he described."
Pretty vague statement there, already indicating a back track from asserting Wilco himself was the problem.

Your name is incredibly appropriate if you don't understand.

Problem: empty nesters in large homes not moving. Outcome: Young families unable to purchase large home.
Wilco: empty nester with 5 bedroom home.
Outcome: You got it, young family can't buy home

This of course fine but Wilco is making statements/suggestions on solutions which he himself wouldn't follow through with. He feels sorry for FHBs and young trying to get into the market but won't do anything to be apart of the solution.

As some would say - practice what you preach

Also I have young kids in a large home that fits them, and I'm planning to keep it so my grandchildren can come to stay and we can host Christmas at our place. Other factors come into play than security, especially if my kids can't afford their own home and can't host Christmas there in 20 years' time. Or the kids might stay at home a lot longer than anticipated to save up for a house. Empty nesters may well have their kids come home for that sort of thing and downsizing too quickly would be a mistake.

Nifty1 - Yours weren't comments - they were criticisms. I was clear that I was using my personal example to illustrate how the housing system could be improved.
So to answer your barbs.
Anyone who has been on this site for a while knows I live in Northland. I often write about issues pertaining to up here.
I am a farmer, again most would know from previous comments I have posted.
Most farmers (surprise surprise) such as us live rurally where council zoning rules limit intensification of subdivision and new construction.
So no -unless we move into town, we don't have the option of terraces/apartments. And there follows the comments about my wife's objections - we would have to leave our neighbourhood and friends.
There is no personal benefit to the solution I am suggesting - just a genuine desire that others have the same chances I got when I was younger.
I have never complained, I see a social injustice developing regarding home ownership in NZ.

Ok so how could your proposed plan get you to move from your northland property? Would developers need to develop intensive housing in your neighbourhood and market it to older folks as a downsize option? Would your neighbour's support that & how would it effect the nice street you have?

I get the feeling developer's don't specifically market to downsizers as they may have a similar outlook to you. Comfortable where they are and don't want change.

Nifty1 - Developers go where the money is. The government recognises this and tried to influence builders to build first homes below certain price points depending on location For a number of reasons this hasn't worked. So instead of fruitlessly continuing to attempt to 'push' demand why not go to the other end of the housing market and 'pull' the market via downsizers.
To answer your question - If a builder put up a nice 2-3 bedroom brick n tile on a small minimal maintenance section on our road that suits the next stage in our lives we would definitely be at the open home.
As I stated I have seen a really successful example on the northern side of Tauranga. Current new townhouse builds don't work for older people. Don't want stairs, so no second floor,. must take into account sunlight, easy access into and around the house (future proofing), access to public facilities and/or public transport, not be cut off from the community.
We are not NIMBYs however there are suburbs in Auckland and other cities that deserve protection against development - not to protect the residents but to protect our heritage - so we don't all end up plaster walls and mirror glass. .As well as farming we are involved in other businesses that have included residential construction in Auckland so I know what I am talking about. I also have a number of relatives in Auckland at various stages of home ownership so have advised and assisted them first hand
I have tried to offer constructive comment on a possible way forward. What have you bought to the conversation?

We bought a new 3 bedroom townhouse in Auckland in late 2018, for 750k. The cheapest existing 3 bedroom houses in the area were circa $1.1 million, which we couldn't afford. Even old 3 bedroom flats were around 800k.
We have also gained the benefit of low maintenance costs for the foreseeable future, and our power bills have been much lower than in previous rental properties, with above code insulation and double glazing.

There's lots being built and more to come on Unitec Site, Northcote etc etc

We had the opposite problem, loved our house but couldn't stand the st or nutty, socialist, curtain twitching neighbours. Had to bite the bullet and spend more than we wanted to buy in a different location and still spend more remediation all the issues of a poorly built NZ house. Them's the breaks.

The expectation is there because buying townhouses and apartments is much more realistic than buying a suburban home.

Fritz - I agree the Unitary plan has added a significant premium to properties able to be subdivided compared to townhouses and units.
However the current ideas are not working - all they have done is add profit to the developers and existing home owners.

What I am suggesting is instead of knocking down one family home and building 4-6 new homes on 200sqm sections specifically for new home buyers knock down one family home - move 4-6 older couples into the new builds and 3-5 young families move into the vacant family homes. The government involvement would be in the equity shift.
The outcome over time would be the same - more housing - reduced demand pressure - drop in land price pressure.

I have always said it and I will say it again. First time buyers are not prepared to get onto the property ladder on the bottom rung. If they lowered their expectations like people did in the past they would be in a better situation than they are now.


You can it as many times as you like, it won't be any less tedious and irrelevant. "Lowering your expectations and moving further out used to mean "Howick", not "live in another bloody district and spend 2 hours commuting to and from work each day".

The bottom rung isn't what it once was, as investor interest in this class has bumped these prices up to a premium. I can't imagine a FHB is that excited about paying a premium for a house that needs a lot of work, and then not being able to afford that work because everything is going to the repayments. I don't think a healthy home is really asking too much.

Currently the only way around this for a FHB is to buy in a cheaper town and rent in the town of their employment. Except even this option is restricted given deposit requirements if you are not living in it. So FHBs are screwed either way.

Can you tell me how much you paid for your first home relative yo your earnings and were you purchased?

From memory it was about 3.5 times my income, ten years ago in a major NZ city (not an apartment). NZs current average gross household income is around $102,000. It would be hard to find much if you had a $350,000 mortgage plus 20% deposit in a major NZ city, let alone trying to save that deposit with current rental prices. Christchurch and Dunedin maybe still possible? I don't know those markets very well so couldn't comment.

You'll get very little in CHCH for that.

This isn't fair.

House prices relative to household incomes have risen from a low of 2 in 1980 to 7.9 today.

This is because older New-Zealander's have rigged the monetary system in a way that enriches themselves though asset price inflation at the
expense of younger New-Zealander's. See below link

It sure isn't fair. I'm under no illusions that I got lucky with low deposit requirements and when I was born (borderline millennial maybe). Anybody who is also in that boat is deluding themselves if they think it's thanks to their own expertise or 'working hard'. Most people work hard, it's nothing special. Unfortunately that is no longer anywhere near enough.

I don't think FHBs have an expectation, or even necessarily a preference, for new builds.
The issue is more that new builds are *cheaper*, because they tend to be on much smaller sections (townhouses, units) or in fringe areas.
Plenty of FHBs (including myself) who'd love to buy a run-down old state house, but those are all $1m+ now because they have decent sections.

Yes exactly. Affordable housing, as defined in NZ, is all built around the false premise of cutting the house size in half, stripping it back to the bare bones of minimum building code, and say that is the same comparable affordability definition of what people used to have in previous years.

Following that logic, a 'shoebox in middle ol' road' would also be an affordability comparative. As it is we are down to tiny houses as affordability options.

Can’t even find existing 3 bedroom homes in Wellington under 700 any more. Highly doubt you’ll find them in Auckland

Except the actual cost of home ownership will be at least another $100 a week on top of that, particularly with the rumblings coming out of Watercare currently. I'm in a middle income household (albeit not in Auckland) and there's no way that mortgage is feasible. Add kids into the mix, stagnant wages/salaries and its effectively impossible. Even more so if there's any kind of spike in interest rates (likely over a 30 year term). There's far less $100K+ jobs around than people who need them to service mortgages like this. While it may be a reality, is this level of indebtedness over 30 years something we should be aspiring too, or be proud of?

Absolutely not. Quantifying how much of our household incomes is committed to the bare minimum repayments over a 30 year time-frame, limited scope to increase this in the face of ongoing living costs and a massive blindspot in terms of how many hours people are working to generate their household incomes (e.g. is it one FTE job or closer to two?) have all perversely skewed our idea of 'affordable'. My pick is we'll soon start talking about 35 year mortgages as an entry point to keep papering over the scale of the problem.

The reality is, city dwellers will only pay off their mortgage when they sell to live in a retirement village and/or relocate to a small town. The dream of moving up the property ladder and living in your 'forever home' while paying the mortgage off prior to retirement is pretty much gone.

Good points.
However, what is the alternative? Accept the current reality and focus more on renting as a viable alternative?


Planning anything without a long-term population strategy is pointless. Successive governments have now taken the easy road for GDP 'growth' by importing people, regardless of whether we can house, feed or transport them. Until we address that, we're locked into our current trajectory. All we can do is try not to make it any worse - but it turns out we're pretty bad at that too.

Yep totally agree. But as you say it will only be damage control.

Exactly. Renting off the bank is still far better than renting off a landlord especially at the moment as it’s cheaper. And who cares if your mortgage isn’t paid off at retirement you’ll still have a massive capital gain not to mention all the other benefits of owning.

Home start threshold in the Waikato is $500k for a new build. Amazing how many new shoebox houses suddenly popped up for $499,000 as soon as that came in.

This would only increase housing inflation further as more buyers compete against each other for stock that will cost more

Wake me up when it comes to 1% pa

What? another 100 years -

The way we are going, probably 2 or 3 years.

Owning vs renting getting cheaper by the day

Councils are doing their best to make up the difference with rates increases though!

wholesale rates haven't chaged much since beginning of December so anyone who fixed since then could break quite cheaply and win bigly.

I wonder if there will be so much frothing when they head back up.

With swap rates heading upwards, these cuts must be driven at least partially by the funding for lending program. I wonder what type of collateral the banks are having to provide to access those funds, and at what point they decide that lending margins aren't worth putting that collateral on the line for in a world where financial instability seems to be increasing by the day.

I too have been watching the swap rates - there has been no matching move upwards in my mortgage rate however there was no lowering by my bank when the swap rates dropped to near zero. So now my mortgage rate and the swap rates are back in tandem.
I understand the biggest win for banks at the moment is public inertia. With bank rates so low a significant proportion of funds are sitting in zero interest accounts as people aren't motivated to organize term deposits.
My bank manager said word was there was no real interest by his bosses in the government funding even at 0.25%.

Checking in here again after a few months. Still crazy times, getting crazier. Doesn’t seem like any short-medium term solution to the housing bubble, except a bust at some stage. In the meantime, prices getting more expensive, with people taking out bigger mortgages with lower rates. Not a good situation, unless you are an industry vested interest.

I reckon it's inevitable that this more contagious covid variant will get into the community.
Assume more lockdowns. It will be the final straw for some businesses.

Would it not be a good idea to fly in just a few thousand doses of the vaccine ASAP. To vaccinate the front line MIQ workers. The extra layer of protection that would give us would be worth it. We are subsidizing AIR NZ to fly multiple times a week to LAX. How about entrust one of the crew on layover to go to distribution site. Collect vaccine doses and return to LAX and back to NZ. Or just fly the 787 on to the closest airport to the distribution center and pick it up. The additional cost in the scheme of things is inconsequential. The vaccine can last 10 days in the factory shipper and another 5 days refrigerated. Plenty of time to administer a few thousand doses to front line workers. A bit of out of the box thinking could save us from a potential $100 mln ++ level 4 lockdown.
Right now we are rolling the dice every day. Eventually they will come up snake eyes.

Hey that's too sensible!!!

Unfortunately we don't know that the vaccine prevents asymptomatic transmission, only that it prevents symptomatic infection. Hence vaccinating MIQ workers could conceivably actually make things worse, if it just suppresses symptoms without suppressing transmission.

Huh??? Can we get a source or an appropriately qualified scientists comment.

Instinctively I find this nonsensical. The treatment of the virus has nothing to do with the symptom presentation I'd have thought. Either the vaccine works in preventing both asymptomatic and symptomatic infection or it fails both? The virus is the same, it's the individuals differences that present or dont present the symptoms?

Or am I the fool and over simplified?

That makes sense, yes, but it's much harder to test. So we don't know yet.


Wholesale rates increasing worldwide, stock markets coming off record highs, both these will dent confidence in the house market, you all keep talking about mortgage rates, but I don't know anyone with a mortgage and that includes my son. My neighbours son was talking about getting one, but in the end, he just paid cash

DIYman - what side of Stewart Island do you live?

Not sure of the context, but we live in Christchurch

Which retirement village do you live in, DIYman?

DIYman - just a tongue in cheek response to your comments about the lack of a mortgage.
Tried to pick a part of NZ that might not need one when buying a house.
I definitely wouldn't have picked Christchurch.

DIYman, if he was able to just pay cash and not get a mortgage, he must be in the very privileged financial position compared to most youngish people.

Or need an AML visit....

One paid $300k, the other 430K, both have good jobs, with household incomes over 200k

They have good jobs, and they save hard, what are you talking about, both my son and his wife each earn over $100 k a year. Christchurch is one of the few places in the country where you can buy an affordable house in a reasonable area., under 500k

Wow it is that simple then, just have 2, 99th percentile incomes and buy a house at the cheap end of the country. Why didn’t I think of that!

Your 99% ile comment, where does that come from?, about a quarter of the staff in our local bodies earn more than that , the government in Wellington is no different, lots of young grads get over 100k.

There are actually stats on this - about 300k people earn over 100k (out of a workforce of 2.6 million). So slightly more than 10%. Your son and his partner are earning an unusually high salary. Its certainly not common for young grads to be on more than 100k.

Exactly, they are in the top 10% not the top 1%. Your 2.6 million workforce includes a fair few under employed or part time workers. My son puts in 40 to 50 hours every week, and deserves every penny.

I don't think anyone is saying that your son doesn't work hard, or doesn't deserve it. But the fact of the matter is that not many people are in the position he is in: he lives in a lower cost part of the country, earns a top 10% salary at a (presumably) quite a young age, and also has a partner earning a top 10% salary. So your comments that 'you dont know anyone with a mortgage' and 'lots of young grads earn over 100k' come across as a bit 'let them eat cake': the reality is that the vast majority of young people are not in as good a financial position as your son, despite the fact that they also work hard and are just as deserving.

There is some correlation in NZ between average income and house prices in a particular city, for example Wellington house prices are driven by the generous contracts the government keeps writing, I keep hearing of young grads on $1000 a day contracts, yes over $250k a year, surprise surprise the cost of houses in Wellington is mirroring these contracts. Likewise Christchurch, where the average wages are no where near Wellington. Computer programmers in Christchurch get about two thirds what they would get in Wellington, and again the house prices mirror the wages. Fortunately my son has a Wellington job, but he gets to live in Christchurch.

You cannot taper a ponzi..

"Encouraged by the RBNZ, one major bank offers a 2.29% one year fixed home loan rate. It is almost certain to signal a new round of mortgage rate cuts that will juice up the already-hot housing market"

Perfectly summarised DC

The big question Yvil is will the OCR go negative?
Small little trims here and there won't have a big effect on the market, but it's a different story if we see one year fixed rates at say 1.8%. That will only happen if the OCR goes negative. And I don't now think it will.

And my last term deposit with Westpac, maturing the 22nd of this month, will be leaving the bank.

I have until April but I'll be doing the same.

Understandable but where will it go MH… into property ?

Or perhaps shares. My dad's share portfolio has increased by about 30% over the last year or so. And there's some good dividend paying options.

Shares will probably become a good option for a lot of Kiwi's. You are inherently hedged against currency devaluation while at the same time not having to deal with the liquidity issues of property. You can almost treat an index fund as a form of currency in its own right.
I imagine a lot of the negative stockmarket stigma from the 1987 crash has all but disappeared.

It's perfect for my dad. On moving to a retirement village, he had about 500k to play with. At 80 years of age he couldn't be bothered with property, 500k would hardly get him anything anyway.
I think shares will becoming increasingly popular as the population ages and retirees want somewhere to put their funds.

Fritz, I hope you can see my comment for what it is, an honest, concerned comment. I believe at 80 years old your dad is taking a huge risk by investing in shares because he may not have the time left to ride out for the shares to recover from the upcoming crash. You know I'm a very positive guy but I see extreme risk of a very major stockmarket crash (which will also affect most other assets, i.e. property, bitcoin etc…)

And you don't think US shares are grossly over-valued by this point, and when they correct they won't take world markets with them? Think February 25 last year, but with no recovery this time.

Perhaps this stimulunatic environment can keep this massive bubble going longer, but some stage, there is a reckoning.

So you have to impute your age: if you're young and can recover from a crash perhaps the high risk of shares right now is okay. If you're retired or within 10 years of, I'd be very careful on being over-weight in shares right now. That's where I am: and preservation of capital is my main priority.

Being grossly over-valued does not equal 'collapse guaranteed'. Just look at the housing market for at least 10 years. What probability you guesstimate there to be of a USA share market crash in the next 2-3 years?

I have to say though that the old man is being egged on by his mates and he's getting a bit cocky.
I was at his friends' place over new years, real shares bulls, denying any likelihood of a crash. They were saying it's pointless having money in TD. But it's not if the market crashes and you lose, right?
I think if I was him I would sell half his shares, and put into TD. Keep the other half in shares. So he has hedged.
Keen to hear people's thoughts. He's 80 years old, very good health.

At that age, an annuity or similar guaranteed income scheme would pay pretty well. May harm your inheritance of course, but can't be beaten for stability.

His shares seem pretty low risk ones, energy companies etc.
I don't know much about shares - if the whole market tanks is there usually much difference in the falls between 'safer' bets (eg. Power companies) and higher risk shares?
Or do they all usually go down with the ship?

If he's just holding and taking the dividends, the risks are smaller. Last year was more savage than most stock market crashes regarding dividends, and some countries probably saw dividends paid down by ~30%, usually the dividend payments are more stable than this (if sufficiently diversified, holding at least 10-20 companies or some index funds).

In general, the safer utilities should be more robust but there are no guarantees - power shares in particular have gone up so much in the last few months a 20-30% fall from here wouldn't be too surprising.

Your idea of selling some and holding some cash is reasonable, or taking a chunk of the funds and sticking into an annuity to cover his basic income needs (which might also be simpler if he loses some financial capacity in the future).

Ironically it takes balls to cash out of the market right now.

That tells you a lot.

MH... yeah those are the reasons I am apprehensive about adding to my NZ share portfolio but it may be the best of a bad bunch of options?

The problem is if this is a bubble, we could risk another 87 crash, because of all the cash that is going into assets like property and stock. In the US, a lot of their stimulus checks are apparently going into stocks and bitcoin, pushing them up to historic high levels. In NZ there was also a lot of money saved. Stocks can crash, and did crash in 2020 but the question is next time will they recover, or as quickly. Some stocks like some bank stocks, have not recovered. Especially as many buying shares now have only purchased them since lockdown, and are new to the sharemarket, so have never experienced a crash and seeing their money they have invested worth significantly less.

Nail on head matey. I am befuddled by how many people seem to have forgotten the lessons of the three week share crash/rout just last year (we're coming up to the one year anniversary). Valuations are now even more distorted on top of a perilous post-Covid world economy where earnings are smashed and many former consumers are unemployed and can't pay the rent or the mortgage (the crash last year was pre-Covid), so the 'recovery' will be a decade, perhaps two, this time. Indeed, perhaps the crash will be so deep we'll be looking at paradigm change around the whole institution of central banking and their foolhardy recklessness which is breath taking. But, we have short memories: shares go up the stairs, down the elevator - when the slide starts, you don't get out normally.

MH... yes this is why I am apprehensive about an increase in my share portfolio but where else is sensible? I pulled quite a bit from the market in April/May last year (worst possible time obviously) fearing another 1987 (or worse) and wanting to be safe and responsible. However, with the likelihood of asset price inflation over at least the next year or so I feel I am losing too much by holding significant TDs. What to do??

I can't advise. For myself, preservation of capital is all: the risk/reward for shares right now is horrible - I can't touch that. So I'm sitting on - well in - illiquid hard assets, bonds (but only to the share crash, then I'm out of those after the final rally), and mainly cash :)

I'm waiting. And that, sometimes, for some people, is a perfectly good policy.

MH...Thx. feel better about my own position now. GL.

Yes, that is the rub isn't it.

Before Covid I invested into an unlisted commercial property fund (which is still doing very well, but I wouldn't have put the amount in I did if I'd known about lockdowns - fortunately the fund has an ability to cash out, monthly, unlike many funds - always have an exit - but where would I put that money? So it stays.)

We live in Marlborough so we bought a second house in Chch ... which shows you how lunatic current monetary policy is as that was a sensible investment (note also bought for lifestyle reasons as my mum is in care in Chch and we try and get down as much as possible).

I've got money in NZ treasuries and NZ/AUS corporate bonds which have done okay over last two years, but as rates have approached zero, frankly these are as risky as shares, and I'm thinking more and more of reducing exposure ... I'm just hanging around for the rally when shares crash.

I have just 3.46% of my savings in Harbour's very good Long Short Fund ... that's the only investment I have any exposure to shares, and 1/3 of that is shorting. I won't touch shares otherwise until after the coming crash (whenever that is).

So this maturing deposit simply joins the last few into Harbour's Enhanced Cash Fund (currently earning [gross/annualised] 2.36%).

So, I'm just waiting. Overall this year, outside residental, I'm on a 5.4% after tax return which I'm happy enough with. It's falling though, and at this stage I just don't see a way to get a return in the next financial year, unless the share crash arrives first.

Oh, just for fun and to figure out the workings of crypto exchanges and digital wallets I bought $4,500 of Bitcoin end of October last year: currently ludicrously worth $11,165 (was over $12k two days ago :) )

Stimulunatic monetary policy has broken the world for the prudent, risk averse investor, I'm afraid.

Note: no, I don't want or need investment advice nor criticism. My investments are exactly as they need to be, for me.

MH.."stimulunatic monetary policy has broken the world for the risk averse investor". Perfectly put and I just don't know how to react to it.

Yvil... I have my NZ money equally split amongst (owner occupied FH house), blue chip shares, bonds and TDs. In my early 50s and have TDs maturing throughout this year. I can't see a defensive option that I like. What would you do??

Why wouldn't you get property for defensive play and hold long term? Or did you say you had property.

Theoracle... bought what is now a 7 figure property (thx Jacinda) in Feb last year in Taranaki and elderly parents have 2 properties ( one of which I will inherit) so feel more exposure to a very over inflated property market may not be optimal especially as I feel the risk of a serious correction is way higher and much more real than almost everyone else thinks. If there is a big drop in Vegas (similar to a decade or so ago) I will probably buy property there. I just don't know what to do. I also agree with Mark that NZ shares are over valued and some serious drops are imminent, but who knows when.
I just can't see anywhere I feel comfy putting my money right now.

You may know that I have been a positive guy when it comes to outlook but I'm slowly changing my mind, I think the risk of a major collapse is increasing exponentially, I would maybe hold cash but of course that's your decision. Also I like to stick with what I know best (property in my case) and I think that's a good strategy for most

Yvil...thx and yes I have 25% wealth in TDs which I will likely retain, although plan to move much of it to Thailand and USA in order to get deposit insurance and to add diversity through possible currency fluctuation exposure. Am arrogant enough to think I can (accurately) predict our dollar becomes stronger vs THB and USD over short term so will wait but based on my last years' predictions I will be wrong (and lose $) again.
Good luck with property. I was as bullish as anyone on NZ property between 1988 and 2015 but contrary to popular opinion feel it is very possible that at some stage things may get worse than most can even imagine, but who knows. I am not totally ruling out buying a rental (or even invest in some land banking) this year myself. GL

Mark Hubbard... and where will it be going? In the same boat so seriously interested. Thx.

Have a good read of my post above at 12.52pm ... I'm simply building cash in Harbour Asset Management's Enhanced Cash Fund, and am waiting. Forever if I have to.

Preserving my capital: that's all I care about in financial markets of unparalleled risk right now across pretty much all asset classes.

MH...Thx. I read your earlier post to imply that holding 25% of my wealth in TDs is not so silly. Most others have said I am losing too much for that to be good but it seems you are on the same page as me and you feel playing safe is probably wise right now?

Perhaps better to fall behind inflation a tad for a bit, than lose 60% to 80% in the coming correction ;)

That is very possible, and within the next 12 months: I believe this idiot melt up will go for another month, perhaps two, then reality comes back. But we'll see.

MH...agree and thx

And that’s just the carded rate.
Better head to those open homes now while everyone else is still on holiday mode, will come back to full swing again March April.

One bank has drawn $1 bln in the FLP line late last year. $1 bln is enough to fund about 2000 home loans.
The Funding for Lending Programme (FLP) has been declared a repo transaction available to existing RBNZ counterparties.

Outstanding bank funding arrangements for eligible collateral securities are forecast to be replaced by RBNZ OCR priced funding under this arrangement.

Thus, banks still have to negotiate depositors' risk appetite when extending new credit for leveraged residential property loans, at least until the same can be packaged into a new or existing RMBS asset eligible for FLP repo loans.

Is there a limit to how many performing mortgages can be packaged into securities, while the remaining risky ones form a concentration risk for underwriting bank shareholders and depositors?

This whole thread is the conversation at literally any BBQ in Remuera :buttery_chardonnay_emoji:

Lol thats what I was thinking...

Just what house prices needed. Another thing to help push them up with even lower rates.

Wellingtoninvestor... just got back from Wgtn. My mates just bought a big chunk of land (between Hutt Valley and Wgtn) which they can be carved up into about 25 sections. With rates so low they just borrowed the capital and will land bank it all. Might not even EVER bother with doing the subdivisions let alone building on it. Perfectly illustrates the issues with the direction we are going.

NZ Herald says the new low rate is only for owner occupied houses. Good, finally some common sense.

I wonder how much cash is being removed from the banks at the moment with such pitiful interest rates, and is being put into houses, shares, or into kiwibonds or gold etc etc. Do banks have to keep a certain amount of cash deposits in their accounts under these current times? If they go under the required amount, what can they then do? Certainly keeping money in the bank earning nothing after inflation, is not an attractive option for mum and dad savers. Especially as the banks earn a healthy margin off those savings.

Just for a different perspective:

Dallas, Texas.
25yr old Teacher on $58,000, just bought a three-bedroom home for $155,000 (median income to house multiple of 2.67)

Interest rates at approx. 2.3%

Ohio and Indiana have even better ratios.
But really, what's the point in comparing USA with NZ?

I'm not comparing USA, I'm comparing Texas as we should be. If I was going to make a direct comparison I would say we are as unaffordable as California.

Or if we did make a more direct comparison, how about we compare that until the early 1990s NZ was also 3x median income. Or that on basically every other economic metric like literacy, math ability, etc. we compare ourselves to a universal standard (UN, OCED).

Universally, the only difference for house prices is housing policy. There is no reason why NZ should not have 3x median income, just like we used to and others still have.

A sure sign, that by March the OCR should go negative ushering the rest of the Banks to follow suit. The lower the better for NZ economic darling, in any uncertainty.. it is best to preserve the wealth. Remember, in NZ lifeboat safety when liner cap size, women & children are off please. Safe the Bankers first.

I think rates go higher soon, and by a lot.