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Home Loans Today – September Report 2011

Current Interest Rates as at 5 September 2011

Variable 5.40%
6 Month Fixed 5.60%
1 Year Fixed 5.55%
2 Year Fixed 6.20%
3 Year Fixed 6.70%
5 Year Fixed 7.40%

Interest Rate Outlook
Predicting Interest rates is as difficult as a game of charades with children right now. No sooner does there appear to be the movements of recovery in NZ & demand for fixed interest rates and the next thing the global debt crisis worsens and we all start second guessing each other.

Clearly our friends in the US and Europe are along way out of the woods in relation to their debt and funding troubles & this affects us, as due to our size we fund a good portion of our residential mortgage book on the international money market.

As Europe & the US scramble to keep their credit rating and head above water the price of fixed term money remains low and our earlier concern that fixed interest rates could spike has eased.

Locally, we are still showing signs of recovery with housing consents starting to move upward and the level of mortgage approvals up some 20% on 2010 indicating activity is definitely on the increase. Furthermore as soon as the government can coordinate the Reinsurers overseas to provide cover on new houses built in Christchurch going forward the market will really kick as currently this is stifling the rebuild and recovery in the region.

With so many variables outside of our control it does not give anyone much confidence to make bold predictions and while the fixed rate pressure has eased, we still feel the above international debt crisis has only delayed the inevitable rate increases. We do not believe we will see rates increase in September now as originally thought and this could be pushed out to as far as the end of the year, providing more breathing space around these sub 6% interest rates.

Put simply if you are of conservative nature, the current sub 6% rates for 1 year or low 6% for 2 years still look appealing, if you are more aggressive and are prepared to keep an eye on the market the current variable rates are still the cheapest option. The only option we currently have any confidence in is to have a dollar each way by fixing some and having some on floating.

What’s Hot
As the above outlines the finance market sure is a fickle place and majority of our clients really are confused as to what the right thing to do is in relation to interest rates right now. The single biggest demand we currently have is for advice on interest rate strategy – see above for ours.

Tips on how to Make Money from Property:

There are  three ways I know on how to make money from property:

1)      Buy wholesale from the property market

2)      Buy before the next boom in the property cycle.

3)      Adding value to the property through renovations.

Why Renovate Properties?

1)      Run Down properties are easier to find in the market.

2)      Easier to negotiate the price down on a property that needs to be renovated.

3)      Renovations in a raising market will add value straight away.

4)      Renovated properties increases rental returns.

Home Loans Today News August 2011

Current Interest Rates as at 1 August 2011

Variable 5.40%
6 Month Fixed 5.59%
1 Year Fixed 5.55%
2 Year Fixed 6.20%
3 Year Fixed 6.70%
5 Year Fixed 7.45%

Interest Rate Outlook

Should I stay or should I go now? If I go there could be trouble, if I stay there could be double….
This rock song classic by the Clash sums up consumers’ attitudes toward interest rates at the moment. Should I fix now or should I stay floating?

The consensus of most is that you should fix your interest rates soon, but when, should you do it now or can you squeeze another month or two out at these basement rates of under 6%?
As the bank economists sat glued to their IPad, IPhone, Blackberries and some even the old fashioned computer or worse still the archaic radio for Reserve Bank Governor Alan Bollard’s address last Wednesday, most were left none the wiser as to whether now is the right time to lock in. Dr Bollard certainly has indicated that rates are going to rise this year, although exactly when nobody is sure.

You get the impression he would like to move now but is very concerned about the strength of our currency (or more so the weakness of the US) and this may be the sole factor in holding rates back to their current level. As such it doesn’t really put us in control of our own destiny when it comes to rates as we are reacting to events in the US & Europe as their debt crisis worsens.

We pick that he will move in September and the move could be as high as 0.50% which will see a groundswell of consumers running to fix their interest rates. Be aware though that as demand for fixed rates increases so may the price & we would not be surprised to see fixed rates move out before the variable rate moves.

Our advice is to not be too greedy now as it may cost you in the future. It may be worth considering locking in part or all of your mortgage in the next month or so because, let’s face it, interest rates sub 7% locked away for a period of time don’t look too bad!

What’s Hot

Fixing your interest rate! As many of our customers get nervous they are flocking from variable interest rates into fixed rates. Nobody knows when but at some stage this year rates are going to rise and often it is the fixed rates that move before the variable, so fixing now does make sense.

Home Loans Today Newsletter July 2011

Current Interest Rates as at 1 July 2011

Variable                      5.40%
6 Month Fixed              5.59%
1 Year Fixed                5.55%
2 Year Fixed                6.20%
3 Year Fixed                6.70%
5 Year Fixed                7.45%

Interest Rate Outlook

You can’t help but think that we might actually be our own worst enemies in slowing the economic recovery. There are so many variables that indicate we are set for strong growth but they have been this way for a while now.

We have a market shortage of quality properties on the market, those that hit the market well priced are snapped up and market rents are rising which will surely start to push people toward buying. We also have a whole new wave of potential buyers hitting market as Kiwi Saver matures to a point that allows consumers to withdraw their and their employer’s contributions, as well as qualifying for the government first home buyer’s grant of $1,000.0 per year for every year you have been in the scheme.

So what is holding us back? Confidence or more to the point a lack of it, as a nation we are still sitting on our hands, afraid to spend, afraid to take a step and it is this lack of activity together with a net outflow in terms of migration that is holding our economy back. We just need a little more activity and demand and the market can get some momentum which it sorely needs.

Mortgage approvals are up just over 10% on 2010 so this is a good indicator and as soon as the rural sector actually starts spending their 2^nd consecutive record payout as opposed to focussing solely on reducing debt the quicker the economic recovery will kick in.

In relation to our recommended borrowing strategy we hold a similar view to last month, we have no doubt that we will see rate increases in the last quarter of this year and as such feel that the shorter term fixed rates probably offer the best value as there is little differential between variable and 1 year or 18 month fixed rates. For those a little more risk adverse we suggest the 2 year rate still offers good value @ less than 1% above current variable rates, as long as you realise you pay a small premium now to buy some security.

What’s Hot
Kiwi Saver, it has now reached the stage where consumers who have been in their Kiwi Saver for 3 years can withdraw their and their employers contributions together with a first home buyers grant from the government puts many of these people in a position to buy their first home.

If you are looking for help in buying your first home and have been in Kiwi Saver please do contact Home Loans Today to help you through the process.

Moving Home Checklist for New Zealand

Moving Check List

A list of Ideas to make your life easier.

1)Treat yourself to a cleaner if you can afford it. It will mean that the rental property will look top notch when the agent comes round for the final inspection. Maybe get the cleaner just to clean the kitchen, bathrooms and any other rooms that received the most use within the home.

2)If you are using a removal company get at least get three quotes. Ask if they do provide a discount on an early weekday move. Friday is the busiest day for movers.

3)Check the fine print on your contents insurance to see if it covers damage and breakage while your belongings are in transit. If not organise cover with your insurance provider or removal company.

4)Redirect your mail for free for two months with New Zealand Post.

5)While you are dropping off the form, grab some free postcards to advise your new address to your friends and customers.

6)Make sure you have all utilities get a final reading on the day you move out. Eg : Electricity, gas and water.

7)Create a separate valuables box which contains all your important documents.

This way you keep all your important documents together with which you will be able to retrieve the information quickly.

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