Is it possible to have a mortgage with an Australian Bank?

[samoconnor]

Hello Property talk members.

I have been asked on behalf of our famiy trust to ask property talk members if it is possible to use Australian banks for mortgages instead of New Zealand banks. Australian banks offer 6.8% fixed mortgage.

Do many NZ property investors use Australian banks because of the large saving? If not or if so, WHY?

Kind regards
Sam O'Connor

[CJ]

Most NZ Banks are owned by Australian banks so you probably already are.

YOu could though there it would complicate matters alot more.

The reason people dont despite the interest rate differential is that you are also subject to foreign exchange movements. Using economic theory, any gain due to interest rates will be lost in forex losses and vice versa (before anyone comments, economics is not real life and the past few years would have shown you would have benefited from a lower int rate and a gain on forex).

[captaincrab]

CJ is right. Its the Forex risk. You would be mad to borrow in Aussie dollars then change to NZ to settle your mortgage, if our dollar is going to go down. This would mean you would need more NZ dollars to pay back the Oz dollar loan.The Project I'm working on currently has a plethora of buyers from around the world. They can borrow in Sing dollars at 3% but are not doing so because they believe our dollar will go down. And they should believe it because Bollard keeps telling us thats what he wants. Hes right too.

[donna]

Tax on mortgages

Don't forget that there is a tax on mortgages in Australia. I believe this is what Dr Bollard is considering on fixed rate mortgages (since he can not control them) and realises it is the Property Investor that usually goes for the fixed option.

Cheers,

Donna

[spurner]

Also, the banks won't lend anyway as they have no security on overseas property.

[roseneath_rat]

Most of those Ozzie-owned banks are using cheap US money to fund mortgage books. Sure beats borrowing money from the Reserve Bank, if you can hedge your currency.

[nutty]

It should be no trouble borrowing if you had security in Australia. Some banks will lend for New Zealand property as they have their fingers in many pies here.

You would be better looking at other countries than Australia. I know in Ireland you can get a 3% loan. You may be able to go to a global bankl like HSBC and get a similar loan loan from the UK.

Yes you are subject to the forex. I hesitated this time last year to get a loan on eoros as all the "experts" said the NZ dollar was too strong and was going to drop. Well it went up another 20% on the euro in that time.

Look at it this way - there is no gaurantee which way the dollar will go but you know you are gauranteed a 50% reduction (or more) if you switch to an overseas loan at 3%.

If the NZ dollar is heading up then all the pessimists out there will say its going to drop. Well, the NZ dollar has not dropped against the Euro for the last five years now.

The same can be said for Real Estate. The pessimists were saying last year that we were to lose 5-10%. Well it didn't happen.

And how long have the pessimists been saying that the stockmarket will crash? It must be ten years now and they are still making the same grave predictions but we are not seeing anything but rises in the share prices of most good companies.

It is human nature to go against the trend. If you would have listened to the "experts" over the last three or four years you may have missed a lot of opportunities.

[CJ]

If you want a lower rate, just go to HSBC NZ and ask for a NZ loan denominated in yen and get a rate of about 1%. You will be subject to the forex risk though which is why people dont do it.

Nutty - I am wondering whether you or me is the nutty one re forex risk as you seem very bullish re the NZ$.

Even those with natural hedges (earning ni Yen) would be sceptical of taking on forex risk.

[Elizabeth]

Pardon my ignorance on the subject please. What is forex?

[CJ]

Pardon my ignorance on the subject please. What is forex?

Forex = FOReign EXchange

Sorry. I see it everyday so it is second nature for me to abbreviate.

[Elizabeth]

ahh brillant! thank you

[samoconnor]

Even..

Even if the dollar does drop hugely, it seems to me that there would still be a saving involved especially at 1% or 3%. Can you use sercuity in NZ or do you have to offer sercuity in the country you are getting the mortgage from?

Kind regards
Sam

[captaincrab]

Sorry Sam, not right. If the dollar drops 5%, you have to pay back 5% more principal on your mortgage if its not an NZ dollar loan.

[tamara]

Sam

Captain Crab is right. Where I live the strong NZ dollar has meant that our earning power on the when transferred back to NZ dollar is less. We now have to provide more of our local currency to come up with the deposit required. No ideal for us.

Tamara

[samoconnor]

..

Oh right. So Forex in the future really dertermines if it's worth while or not.I guess it's very hard to know.Cheers for the info.