Interest Rates

[brokerman]

A rate war will start with lenders ready to take the gloves of to bring in refinances. Refinances for less than 20% deposits are exempt from the Reserve Bank restrictions.

So clients could theoretically buy a home with a finance company and then refinance to another bank at a better rate. Or strangely get an expensive home loan from a bank and then be the target of another banks refinance target.

Can you let me know where this comes from as I went to a round table with the heads of a couple of Banks and it wasn't mentioned, in fact quite the opposite in that self employed people may find their business funding cut to keep the Banks under the 10% limit.

[speights boy]

New term deposit rates see NZ's largest bank offering the best 5 year rate of any bank, as wholesale rate increases push market up

www.interest.co.nz/news/66476/new-term-deposit-rates-see-nzs-largest-bank-offering-best-5-year-rate-any-bank-wholesale-

[Bluekiwi]

No tapering.
Fixed rates might start falling shortly.

That horse has bolted, there is only one way interest rates are moving.

[Davo36]

BK, with respect, you just don't know that. You THINK interest rates are going to go up. You MAY be right. But you don't know for sure.

Many things could cause them to go back down again.

[Bluekiwi]

BK, with respect, you just don't know that. You THINK interest rates are going to go up. You MAY be right. But you don't know for sure.

Many things could cause them to go back down again.

Nope, its all one way here.

But yes, I do "Think" I know that, and in my life I have "Thought" a lot of things and been wrong

p.s. But I know for sure

[Perry]

Sounds like ye olde axiom:

I thought I was wrong, once, but I was mistaken.

[Learning]

Hi Please advice best options to fix loan with looming interest rate hikes, thanking you in advance.

Consult your crystal ball.

Best advice- win lotto and go mortgage free. Though I constantly fail to follow that advice each week.

[brokerman]

Rates have been artificially low in NZ for a while and certainly in 2013 have not reflected whats going on Internationally. All rates going north and will continue to do so from now on. Floating will hit 6.25% in a year and short term fixes already moving fast.

[muppet]

ASB Bank has cancelled all pre-approvals for home loans over the 80 per cent loan to value ratio with effect from October 4.


A spokesman for the bank said it had been telling customers and mortgages brokers about the change over the last few days.
The change comes ahead of the Reserve Bank's crack down on low equity or low deposit lending. From October 1 banks must cap new lending above the 80 per cent threshold to 10 per cent or face losing their license.


Shaun Drylie, general manager, product and strategy at the ASB Bank said the change was being implemented to comply with the new lending restrictions.


"ASB, like all New Zealand banks, has to comply with these restrictions under our conditions of registration."
Drylie said the bank was encouraging affected customers to contact it to discuss their individual circumstances and how it might be able to assist them with a new pre-approved loan offer.

read more at

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11128832

[dandan]

Rates have been artificially low in NZ for a while and certainly in 2013 have not reflected whats going on Internationally. All rates going north and will continue to do so from now on. Floating will hit 6.25% in a year and short term fixes already moving fast.

I think they've been artificially high due to broken loan relending from 2003 to 2008. No break benefits were paid. Profits were maintained after 2009 from break fees and a margin increase between OCR and retail. Us 5yr bond rates increased in recent months with the expectation of tapering. Our fixed term rates increased in recent months due to the cost of overseas funds based on the expectation of an event that didn't happen.

[Leftette]

How can they be artificially low when they're 2 or 3 times higher than all our comparative western nations?

[Bluekiwi]

How can they be artificially low when they're 2 or 3 times higher than all our comparative western nations?

We are not comparative at all, we are a tiny tin pot economy at the bottom of the world.
That size reflects in the rates that our banks and government can borrow money.

[speights boy]

Another proposal from the RBNZ
Mr Wheeler is on a roll it seems.

"The first option is a solution similar to what we propose for lifestyle blocks.
That is, if the borrower is dependent on the income generated by the residential property dwellings to make principal and interest repayments, then the loan is treated as a business rather than a residential mortgage loan," says the Reserve Bank.

"The second option is to set a limit on the number of dwellings that can be included in a residential mortgage loan.

Under this option, if there are more than four dwellings used as security by the borrower, then the exposure(s) is business rather than residential mortgage.
This second option is intended as a more pragmatic solution that recognises some borrowers invest in a second, third or fourth house while continuing in their usual occupation, but as some point (which we propose to be dwelling number five) the investment becomes a business rather than a supplementary source of income.
We anticipate this definition would be easier for banks to administer than option one."

If these loans go from residential to commercial it will significantly affect risk ratings and the banks capital adequacy ratios.
This will in turn mean the banks will have to increase the amount they hold.
This I assume will only increase their funding costs and will need to be passed on to the borrower.

Note:
This may ?? refer to 5 dwellings on one property, as opposed to 5 separate properties.
I am unsure as to which.

[Bluekiwi]

Interesting, so as property investing is also a commercial business, does this mean we are exempt from the LVR restrictions ?

[speights boy]

Next move.
IRD follows the RBNZs lead.

Less than five rentals is not a business ???????