|
Latest Economic Commentary &
Property Report
14 June 2011
We cover:
· The Housing Market
· The Official Cash Rate (OCR) and impact
on mortgage market
· Interest Rate Outlook for mortgages
· Fix or Float your mortgage
· How Long to Fix Interest Rates on a
mortgage?
The
Housing Market
The last housing boom is the once or twice in a lifetime event that one
could expect this. The previous one was in the 70's. Prices for
homes seem to have stabilized as vendors are more realistic. Housing
affordability in NZ is still roughly 6.7 times the average income, which on
a world scale is 'severely unaffordable'. Some clients are now
able to access their KiwiSaver for first home funding. Banks have now moved back into the 95%
space. If you are in this space you
need to sit down with a consultant to look at the ‘Buy Now’ or ‘Buy Later’
scenario and how this will fit in with your overall lifestyle goals and
planning.
We cover the
options, striking great packages with lenders.
The
Official Cash Rate (OCR)
Key
Dates:
28/7/2011
OCR Announcement
15/9/2011 OCR Announcement & Monetary Policy
Statement
29/10/2011 OCR Announcement
8/12/2011
OCR & Monetary Policy Statement
26/1/2012
OCR Announcement
The Reserve
Bank has the right to change this schedule should it be necessary.
Commentary –
As expected the OCR release on 9/6/2011 held interest at current low levels
with expectation of a likely rise between December 2011 and March
2012. Most economists believe that
December/January is the most likely time for a rise which is likely to be
0.25% but we can’t rule out a 0.50% rise.
Fixed rates are likely to rise earlier and punters could well watch any
demands for fixing and improved economic reports, as an indicator that
these rates could rise. Further data
is due for release in July. Christchurch latest
shocks are likely to put a bigger dent in the National purse and it will be
interesting to see how this impacts in July data. Because a large percentage of the
population is now floating, the RBNZ gets faster traction for any changes
made to the OCR. This means that if
they make a wrong call, a quick change to the OCR can right the ship fairly
quickly.
‘Rate
Watch’, delivered direct to your ‘in-box’,
will help give you advance notice of expected or pending
changes. Borrowers should ensure they build in reserves in case
we see a return to hyper-inflation. If that doesn't happen (hopefully
not) then you'll have less debt and be better off financially anyway.
Our 'Rate Watch' commentary (available by emailing ratewatch@mortgagehelp.co.nz)
is comprehensive and should be requested. It is also ongoing.
Everybody's situation is different.
Fix
or Float your Mortgage
Guessing which interest rate is going to be optimal is just that -
guessing. A firm strategy as briefly outlined below, is of far more
value long term. Also one could consider a split between floating and
fixing short, concentrating ones loan reducing efforts on the floating rate
portion. At the moment we would suggest that floating is the best
option.
There is
more to this and our 'Rate Watch'' commentary covers this in depth as to
what may be the best strategy and what is expected of interest rates in the
next few years. You can request your free copy by emailing ratewatch@mortgagehelp.co.nz.
Basic
Mortgage Philosophy
Fix long under 7% (4-5 years). Fix short over 8% (no longer
than 2years). Think averages over length of loan. Average rate
last 30 years - a little over 7.5%. Average rate next 10 years -
likely a little higher than 7.75%.
Plan for rates of over 8% - ie build in reserves or set repayments at that
level. Suggest to always keep repayments at amount required to repay
at 7.5% over 25 years.
Repayment
programmes are individual and we design plans or strategies for our clients
to fit their situation, with the object of being able to ride the highs and
take advantage of the lows.
Contact us
at info@mortgagehelp.co.nz for
your individual consideration. You deserve it.
Please
don't hesitate to email or phone us if you are contemplating buying a
property or properties whether for yourself or for investment. We will look
at your situation now and what you want to achieve in the future, so that
we can structure your borrowing with the right package from the right
lender for you. All this is backed by our Unique Performance Guarantee.
Disclaimer: This information is
intended for general information only and IFL Associates Ltd,
Mortgagehelp.co.nz Ltd or the author accept no responsibility for any
action or interpretation taken as a result of using this information.
You do have the opportunity to put in place a plan authored by ourselves
tailored to your individual situation.
|
