Following the sharp wholesales rate rises, NZ's largest home loan lender takes fixed mortgage rates up to another level. It also raises term deposit rates

....and its the peak of the market too - Rates bottomed out at 2.29% in Oct 2020 and 70% loans written since then have been 12 month fixed loans- every loan that rolls from Nov will be have a full 1% increase on their rate.  Thats $53 extra required per month for every 100K borrowed.

$500K = $265 per month

$700K = $371 per month

$1M = $530 per month

Finally - after many years - a bit of positive news for people with bank term deposits. In particular, many senior citizens will be relieved.

There's justification for interest rates to rise - but the increases won't be overwhelming......

Nonetheless, there'll always be those who have over-committed themselves and, in response to market discipline, will hit the wall at speed. Thus, for others there'll be a silver-lining. 

TTP

Unless you live through the 1930's-1940's as young adult, and are still alive today, then you likely have no idea what real sacrifice and economic pain is.

Boomers certainly don't as everything has been done since they were born to ensure they had smooth sailing throughout their lives.

Millennials are the equivalent of the GI's of the 1930's-1940's who will live through this current madness and remember it for the rest of their adult lives and do their best to ensure that it doesn't happen again on their watch.

Boomers won't change anything as they think the world revolves around then, yet they wonder why everything is falling apart around them when they are unwilling to make any sacrifices. Not their fault though as they were conditioned to believe the world worked in one way, not realising it was what their parents did for them that made their lives work out relatively well. Now their parents are almost all dead, they are lost and confused and don't know what to do.

Yep, I guess every generation has them, but perhaps this generation more than the past.

It might be 'different' this time if the option of dropping rates doesn't eventuate. Not saying that is what will happen, but just saying that in past recessions, the RBNZ has had the luxury of dropping rates to help save those at risk of default. But the size of the debt now and the ability to drop rates significantly has been nearly completely eroded - this could see very different outcomes in the next recession that what you have experienced in the past.

You guys are talking a load of garbage.

If the 1 year rate is 6% in a years time we will have significantly bigger problems than the 1 year rate at 6%.

Feeling nervous?

I wanted to move to Heartland from BNZ but Heartland are so so so slow in processing your application, don’t give any cash contribution and you have to pay lawyers etc, have to move all your main accounts to them, it was so drawn out and there were 2 rate increases from the beginning of my application that I just fixed with BNZ. To top it all, there is no phone number to call to ask for an update. Must say though their email responses are not bad, they reply back same day. 

Stuff have already written articles about the poor home owners taking the hit. It's the comments that get me though.

The "it's just supply and demand, interest rates have nothing to do with house price rises" brigade are suddenly worried about interest rates, funnily enough.

Poor investors - they can cry me a river.

The only time an investor is worthy of sympathy is when they built new to rent. Any other time they're just a parasite, unless they can prove they are charging an affordable rent.

Wholesale market rates aren't going to fall just to suit us. It's not the OCR driving these changes.

The younger millennials will be heading to Australia soon enough. Stay in NZ with crappy overpriced housing and low wages? Yeah nah...

But the government won't care because they can replace them with immigrants with lower expectations of wages and living conditions. It's just globalisation where the labour comes here instead of staying in China etc, both pushing up rental demand and house prices while squeezing young Kiwis out.

Yes, another question that I would like answered is, do banks take out an insurance policy ie can get paid out from, against a customer's loan that goes into default?

The reason I ask is I know of a case where a solo mother with a child that had a medical misdiagnosis and resulting in huge financial costs, and this lead to events with the mother not being able to keep up mortgage repayments. The bank sold her house at a mortgagee auction and bankrupted her on the outstanding $20,000 even though there was more than enough supporting evidence to show there was no benefit to anyone involved to bankrupt her due to being penniless with a child left with a disability.

The only reason I can think a bank would do this (besides being morally bereft) is that to claim on any insurance they would be required by the insurance company to take all possible legal channels available to seek repayment before they could claim against the loss, including bankruptcy.

... lentils are a personal favourite ... delicious & nutritious , full of fibre & protein .... easily stored when dry ... for a family they give one helluva run for their money ... 

Good quality lean beef mince $9.99/kg at our local butcher in Barrington ChCh.

Fresh fruit < $4/kg ( often <$2/kg) from local funky greengrocer.

Major supermarket chains are rorting it

Yep, this news item is rather telling...

Yes, the Aussies have been caught doing it time and again, because their regulators go looking for it.

Most of our banks are Aussie banks, and in lieu of no regulators caring to look, I think it is a fair assumption to think that there is some embellishment going on, or at least their definition of the stress test is one that always sees them being OK. Unfortunately, the customer thinks they are included in this.

I guess begging on the street is always an option.

Because interest rates are low and you can get a better return on excess funds by investing elsewhere.

I already can guess the true answer to the 6% stress test.

It really means the bank getting all their money back, and the customer living a completely different future than the one they thought they would be living.

And one wonders if the 6% stress test should now be 8-10% (ANZ was at 7.5% not that long ago). And if it is, how likely is it that anyone will be able to get mortgages? And if nobody can get mortgages for the current price of houses...

Banks are full of pretty clever people who know what to do.

They cant do anything about already issued loans - they will just hope those people have a pay rise that will counter the lift in rates, but they will apply new levels for new loans ie if in June they were using 6% as the loan level its likely they will now be using 6.5% or 7%.

Banks whilst they will do it - prefer not to mortgage sale properties - so they try to make sure there is always enough buffer.

What it does mean is borrowers in the future may find what they are pre-approved for today will be less when/if  their pre-approval is renewed - assuming no increases in income.

At a time where interest deductibility on existing dwellings for investors is being phased out.  

Not necessarily a problem for developers with developments in progress.  

I think Dale and I were talking more about the buyers.

Recency bias. 

Deflationary to an extent, but what about oil costs and the supply strains now that just in time manufacturing has been killed? What about the green revolution and the move away from products manufacured in China? What about the worthless fiat currencies? What about the increases in rents, council rates, food? Deflation yes, but only after a HUGE inflation spike - a tidal wave over an island that someone once called Fiji on steroids...

I like Subarus as well. Have owned a few and they've always done me proud. 

I tried to place an order on the last of the current gen WRX STI, but got told I'd have to wait nearly 10 months for the car to arrive from Japan so I passed on that. I'm without a car at the moment, and riding my eBike everywhere is getting tiring!

I wonder if we will see some weakening in the car market if interest rates increase and households tighten the belt. Presumably large amounts of car purchases are financed through the mortgage (or just the "wealth effect" and then feel confident enough to go and borrow on dealer finance).

The salesman at Subaru looked at me like I was from outer space when I said I wanted to pay cash - not because you get a discount, but purely because I don't like owing money on anything apart from my house, and even then that scares me. 

Yes it depends on how long higher inflation will last indeed.  It's becoming clear that it's not as transitory as some thought. On the other hand I don't believe that inflation is about to return to its "long term average" because the current inflation isa result of 1) supply issues as you said and 2) monetary and fiscal stimulus, but current high inflation is NOT a result of amazing GDP growth.  I believe that . as governments and central banks remove their stimuli, inflation will evaporate quite quickly, this will then lead on to lower interest rates again.

Since the GFC we have not fixed the economy at all, we have just made it "look good" with government and central bank interventions