Interest Rates

[speights boy]

If in doubt play the "we're all doomed" card.
I see a pattern here.

[mrsaneperson]

Dont be so dismisive sb.I see you still believe in the failed world financial system .

ok then,, select any country to see its debt :
http://www.nationaldebtclocks.org/

AND:

So what do you think would be the average rental mortgage for Auckland? Average house is 650k , banks generally lend on 20% deposit of 130k . Mortgage = 520k

[speights boy]

I simply refuse to be as sad, pessimistic and full of doomsday scenarios as you are regarding this great country we live in.
I'll leave you to your sad outlook.
Far too many wonderful things happening in this word to allow myself to be dragged down by sad sacks such as yourself.

At least you have acknowledged you were wrong in calling for the Govt to intervene on interest rates with the RBNZ.
That was the point I wanted to get across to you.

[Perry]

If the national debt is ignored
wont it just go away?

[Damap]

"Interest rates won;t rise in New Zealand because too many investors would go under", is possibly the funniest thing I have read in a long time.
You really need to get out more.......

[mrsaneperson]

"Interest rates won;t rise in New Zealand because too many investors would go under", is possibly the funniest thing I have read in a long time.
You really need to get out more.......

The same people , those investors are the ones who pay their taxes & in some way indirectly control those levels of interest.

[mrsaneperson]

I simply refuse to be as sad, pessimistic and full of doomsday scenarios as you are regarding this great country we live in.
I'll leave you to your sad outlook.
Far too many wonderful things happening in this word to allow myself to be dragged down by sad sacks such as yourself.

At least you have acknowledged you were wrong in calling for the Govt to intervene on interest rates with the RBNZ.
That was the point I wanted to get across to you.

SB do you really think i'm just some sad sack out of tune with what is really going on? Look at the incredible amount of dysfunctionality & general chaos ,breakdown of society happening . 1 in 4 Kiwis suffer from a serious form of mental breakdown or drug addiction. Cold fact. Now you can sit back in your armchair and say "Crisis what crisis? " and you're welcome to do so but don't try & tell others they all should be happy & positive because in your world you think everything is fine & it somehow does not affect you..The opposite of love is not hate ,it is indifference.

My calcs i believe are about right that an average 3 bedder mortgage for Auckland ,is around 500k. The fallout,from any interest rises the govt has to control to some degree. It already suceeded partially by requiring more equity for first home buyers.

NZ is not unrelated to the rest of the world in terms of the "financial market". So i don't see our interest rates going higher than they currently are unless other countries are first to make that move.
At the moment from my link provided other countries - UK, USA, China- interest rates are much lower than ours.

So surely that is some positive news for you?Or presumably you're not happy about this because you don't have a mortgage and would like interest rates in general to go higher so you can get fatter returns from those council deposits you have.

[speights boy]

The fallout,from any interest rises the govt has to control to some degree. It already suceeded partially by requiring more equity for first home buyers.

This was an RBNZ initiative for all borrowers, not just FHB.
The Govt tried to intervene, the RB ignored their attempt.

Gary posted how one of our major banks was raising the internal interest rate they use in order to assess whether a borrower meets their serviceability requirements.
This is a good sign, as it shows awareness of problems ahead if too much cheap credit flows into our system.

The RB in Australia is concerned about the amount of excessive speculative activity in their residential property sector.
They expect to announce measures this year to help combat that.

The fact that banks here are perhaps preempting a similar move is a good sign.
It is their job to be concerned about rising debt / income levels.
It is the RBNZ's job to make sure they remain concerned.
We do not need Govt intervention at the RBNZ to try to increase the supply of cheaper credit.

If an investor has too much debt their asset will likely be passed onto another who can manage their business better.
We do not need Govt intervention at the RBNZ to maintain the flow of cheaper credit.
You admit yourself that too much debt is a problem.
Making it easier to obtain is not the solution to that problem.

[Davo36]

Wow, here we go, I sort of agree with mrsaneperson!

I don't think the govt SHOULD intervene to save people, but SB, they are doing this EVERY DAY right now!

Borrowing for working for families and interest free student loans for instance. Why? Is it good prudent financially savvy to do so? Of course not, it's about votes. JK even said so. It's politically untenable for them to axe these programs. And that's the only reason they stay.

So if the RBNZ raises rates a lot and heaps of people face going under? First home buyers, investors, anyone with too much debt. I think it's naive to assume the government of the day would do nothing and sit by and watch carnage ensue. Why? Because they'd be out on their ear come the next election - if they even last that long!

So politically, i.e. for political reasons the government of the day would do everything in it's power -INCLUDING CHANGING THE LAW - because they control the RBNZ via legislation to undo any such pain inflicted on the NZ public, and keep the debt party going.

Do I think this is right? No. Do I think it's what a government should do? No. Do I think they'll do it? You betcha!

[speights boy]

So if the RBNZ raises rates a lot and heaps of people face going under? First home buyers, investors, anyone with too much debt.

Gary mentioned a bank strengthening their self underwriting figures by raising their internal rate they use to assess the quality of their borrowers.
The RBA is considering policies which strengthen banks' income/debt ratio they require their borrowers to meet.
The RBNZ will be closely monitoring.
This is precisely one of the actions needed to help stop people getting into trouble through excessive debt in the first place.

You really want all and any future finance ministers being able to call the RBNZ Governor in and intervene because the polls are a bit tight ?
I don't and I see you don't either.
That is why neither of us agree with those who see such intervention as desirable.

The RBNZ Act has current safeguards....they should not be diluted for short term political gains.
We saw that with the Labour proposal to do just that during the RBNZ LVR policy.
It was rightly dismissed.
That is what the Policy Target Agreement is for.
Short term political meddling with the Act itself is dangerous territory.

[speights boy]

So if the RBNZ raises rates a lot and heaps of people face going under? First home buyers, investors, anyone with too much debt. I think it's naive to assume the government of the day would do nothing and sit by and watch carnage ensue.

The next major RBNZ policy will target investors only .....(IMO)
Certainly in Australia I have little doubt that will be the case.
Wealth will be transferred from those who have too much debt to those who do not.
Happens reasonably regularly.
If people choose to think otherwise they should accept the risk they are taking.

[Wayne]

My calcs i believe are about right that an average 3 bedder mortgage for Auckland ,is around 500k. The fallout,from any interest rises the govt has to control to some degree. It already suceeded partially by requiring more equity for first home buyers.

How does the Govt control the rise in interest rates?
The RBNZ can control short term rates to a degree with the OCR but they are charged with keeping inflation in check (mainly), not worrying about how property owners might fair.
Long term rates are controlled by overseas.

So how will the Govt control the rates?

[Wayne]

When i was travelling last year in the USA ,Obama had closed down all the State attractions ie Statue of Liberty ,Grand Canyon etc. They said they couldnt afford to keep those attractions open anymore & still pay the staff because their national debt is in the trillions. They laid 1000's of workers off ,only to reinstate them a few days later when they realised it cost more to lay them off than retain them.

And we were told that it was because they couldn't raise the debt ceiling so were running out of money.
When the debt ceiling was raised it went back to normal again.
Their national debt is still in the trillions and the monuments are open again.

[Wayne]

The next major RBNZ policy will target investors only .....(IMO)
Certainly in Australia I have little doubt that will be the case.
Wealth will be transferred from those who have too much debt to those who do not.
Happens reasonably regularly.
If people choose to think otherwise they should accept the risk they are taking.

The definition of 'too much' is the tricky bit.
I don't think I have too much but only time will tell.

[Meehole]

I'm just still staggered that mrsaneperson thinks the average mortgage is $500K. I'm a property manager now and I don't know anyone that has a $500k mortgage on their rental and I'm working on the North Shore.
We have 2 rentals in Whangarei and they don't have a combined mortgage of that. Someone would have rocks in their head to purchase a property with that much debt, home buyer yes but investment no.
And as a by I have travelled from one end of the Bays to the other this morning and the number of for sale signs that have cropped up is huge! All auction, my advice is let the auction process run, don't cave in and put in an offer prior to auction day. The buyers need to get control of the market and stop the competition and let the prices ease themselves back down to a more realistic value.