Originally posted by Damap
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Sorry Wayne I have the trolls on ignore :-)
Grandfather what?Does anyone think that the bank will be able to apply this extra % to our interest rates retrospectively if we are already fixed? Or will they have to wait till our fixed terms come up for renewal?
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I think you are using the wrong term.
If they were to grandfather the interest rate then they would continue to apply the old rate
so in that context they would grandfather it but you think they won't?
Or do you think they won't make a retrospective change as the fallout would be too great?
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...his observation that it is homeowners in particular—rather than rentiers generally—who are grabbing a larger share of the pie is important for policy.
Mr Piketty used the historical evidence in his book to argue that a global tax of up to 2% a year on individual wealth should be introduced in order to prevent capital concentrating in the hands of the few.
But if housing wealth is the biggest source of rising wealth then a more focused approach is called for.
Policy-makers should deal with the planning regulations and NIMBYism that inhibit housebuilding and which allow homeowners to capture super-normal returns on their investments.
Just how inconvenient Mr Rognlie's argument is for Mr Piketty's overarching narrative is a matter of perspective.
The latter certainly did not make housing wealth the central theme of his bestselling book.
But a story in which a privileged elite uses its political power (albeit through the planning system) to create economic rents for the few fits Mr Piketty's argument to a tee.
Well-off homeowners may for the moment be more responsible for rising wealth inequality than top-hatted capitalists or famous hedge-fund managers.
But their NIMBYism is a very Piketty-like phenomenon.
http://www.economist.com/blogs/freeexchange/2015/03/wealth-inequalityhave you defeated them?
your demons
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Interesting stats this week for Ray White auctions over the weekend. There were about 25 properties, 1 sold pre auction, 5 sold under the hammer and all the rest were passed in. So auctions aren't always as bullet proof as we are led to believe. I wonder if sellers expectations are over reaching the market at last?
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We only pay for an auction if it sells maybe they have different rules. You fork out the advertising regardless but it's interesting to see so many not sell. Unusual for Auckland I think. Maybe the tide is turning back to listed prices. I hope so :-)
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Originally posted by Perry View PostREAs love auctions, because they get paid, success or not. But REAs hate tenders, because no-accepted-tender equals no fee income - as far as I understand those options.
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Originally posted by Damap View PostAuction is no dearer than any other form of sale. You pay for marketing (or not)
and you pay a success fee, that's it.
Will a REA still hold an auction without the vendor paying for some marketing costs?
How much extra to the normal commission are marketing costs for other sales methods?
What does the vendor pay for tenders, besides the usual commission fees on sale?
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Reserve Bank changes for Property Investors
Just attended an ANZ Economist talk and ANZ think the Reserve Bank will bring in changes for Property Investors to help cool the Auckland market. This is likely to force banks to hold more capital for Property Investor loans, which will increase the interest rate charged to Property Investors.
At the moment, the Reserve Bank is working on the definition of Property Investors, but is likely to be
- A property you don't live in
- or a property you derive rental income from
Once the definition is confirmed with the banks, it could be quite a quick process for the Reserve Bank to make changes, which would impact on all floating loans quickly.
If you have 6 month to 2 year terms, these are also likely to come up quite quickly, and mean that you could be liable for much higher interest costs.
I suggest reviewing your strategy and with investors getting under 5.5% for 5 years, it is worth looking at longer term rates!
Other predictions is that the Reserve Bank is looking for any excuse and delay to putting down interest rates, but they are more likely to go down then up. This is for home owners, BUT for Property Investors that Reserve Bank likely changes will likely mean an increase for Property Investors.
Here are some other thoughts on Interest rates from my last Blogg;
Worth a Try! Reducing Interest Costs
5 May 2015
Interest rates are extremely low at the moment,
with great long term rates available,
so it is a good time to review your strategy.
1. Are you on a higher long term rate, over 6%?
Ask your bank what the break cost would be. We are finding that some clients are managing to get no break fees, so it is worth asking the question!
2. Do you have a high floating amount, over $50,000?
On www.interest.co.nz the standard floating rate is around 6.74%. In comparison, you can fix for 2 years at 5.39%.
So, in general terms, it is not a good idea to have too much on floating, and ideally you want this to be an amount that you expect to pay off before your next term loan comes up for renewal. I also find that a small balance of $20,000 or $30,000 is easier to pay off, whereas a big amount like $300,000 is psychologically harder to get to terms with and just never seems to substantially reduce.
3. Long Term Risk
I like to spread loans between short, medium, and long term. It's the old saying of "don't put all your eggs in one basket."
I try to get a rate that I'm happy with, and that suits my property portfolio, rather than chasing the best rate.
So, for example, if you had $630,000 debt, you might:
- Float $30,000
- Fix $200,000 for 1-2 years, maybe around 5.1% to 5.2%
- Fix $200,000 for 3 years, maybe around 5.4%
- Fix $200,000 for 5 years, maybe around 5.5%
This gives a very low average interest rate, but also good long term protection if interest rates do go up.
4. Reserve Bank Risk
The Reserve Bank, Government, and media seem to be constantly talking about ways to stall the Auckland property market. There are ideas discussed all the time, like capital gains tax, land tax, higher interest for property investors, ringing fencing losses, etc. Click here to read an interesting article ("Property Investors Urged to take Precautions") that appeared recently in the NZ Herald.
So be careful and just don't presume that "you'll be right" and that interest rates will stay low. In my opinion, it is better to spread your risk and look at an option like my Point 3.
Main point if you are re-fixing:
Ask for a better rate than advertised. It doesn't hurt to ask and the worst that you can get is "no". But if you are in a good position, with good income, you should be able to get a better rate than publicly offered. For floating rates, you can quite easily get 0.50% off, and fixed rates are negotiable. If you can't get a good rate, talk to a good mortgage broker!
RossBook a free chat here
Ross Barnett - Property Accountant
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