NZ Interest Rates --- OCR----- to Fix or float

Well sadly I still have a good chuck of debt and also work in the primary industry with the vase bulk of our catch been exported to Aussie ....now for years now we have been told constantly of higher borrowing costs yet nothing much has happen and I still here some property investors getting sub 5% rates....

...I personal don't think we will see floating rates much over 8% for long any time soon is NZ has one of the highest household debts to incomes ratio's in the western world....much of are "rockstar" economic growth is based on debt and credit.....just go look at your local Councils debt..Inflation is low only 1.5% hardly needs raining in >>>we had 4-5% back when rates were 8%+ the rest of are trading
partners are demanding Inflation printing money to keep the bad debts at bay and mostly to keep RATES LOW.......trying there best to stir Inflation higher

Personally I have taken least 20% reduction in PAYE for 2013/14 because of the increasing NZD ...I work in the primary industry>>>>if it keeps going higher many primary industry won't survive ....without primary industry you also don't need all the workers that support that industry(we are talking many % of NZ jobs) .........all because Buyers are pushing up property prices in Auck/CHCH that and having the smallest traded currency on the world stage thats talking up paying higher yields ....to a yield hungry world..

personal thinking on fixing short term for 50% of my debt with the rest on floating rates but I may well change my mind before MAY

I have the fixed part of my mortgage coming to maturity in mid April. I was on a 5 year term @ 6.5% so while I could have had cheaper money some of that time on floating or shorter rates, I did have longer term security.
5 year terms seem a bit expensive at 7.2% to me currently I was discussing a 4 year term and the lady said she would try for a 0.3 markdown on the 6.99 advertised rate, but has since come back with only a 0.2 markdown as the size of the mortgage has gone down quite a bit!!!!
Hmmmm
I'm kind of disgusted that they're quibbling with a long term customer over 0.1 %

BTW I have about a 50/50 split between fixed and floating

I have heard ANZ cutting some very good deals of late ..May last year they enticed me with 3k cash and 4.9% fixed for 1yr hoping my old bank ASB can throw in a deal to pressure ANZ on cutting me another deal to stay... likely fix for another 1yr unless they want longer term
I do have good equity to debt 60/40

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Originally Posted by absolut-advance

Broke my 4.99% fixed 1 year cost... $100 to break, to fix at 6.05% for 3 years.

AA

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thats in interesting thing to do AA , a complete change of heart about where rates are headed?

I got my 0.3% discount off the advertised rate by threatening to go elsewhere, it was an idle threat but it worked.

so the fixed component of my mortage is now at 6.69% for four years from 14/4/14
I dont mind paying a slight premium for long term certainty - long term asset should be financed by long term debt in my opinion

NEWSRELEASE
Date 13 March 2014

ReserveBank raises OCR to 2.75 percent

Statementissued by Reserve Bank Governor Graeme Wheeler:

TheReserve Bank today increased the OCR by 25 basis points to 2.75 percent.

NewZealand’s economic expansion has considerable momentum, and growth is becomingmore broad-based. GDP is estimated to have grown by 3.3 percent in theyear to March. Growth is gradually increasing in New Zealand’s tradingpartners. However, improvements in major economies have requiredexceptional support from monetary policy. Global financial conditionscontinue to be very accommodating, with bond yields in most advanced countrieslow and equity markets performing strongly.

Prices forNew Zealand’s export commodities remain very high, and especially fordairy. Domestically, the extended period of low interest rates andcontinued strong growth in construction sector activity have supportedrecovery. A rapid increase in net immigration over the past 18 months hasalso boosted housing and consumer demand. Confidence is very high amongconsumers and businesses, and hiring and investment intentions continue toincrease.

Growth indemand has been absorbing spare capacity, and inflationary pressures arebecoming apparent, especially in the non-tradables sector. In thetradables sector, weak import price inflation and the high exchange rate haveheld down inflation. The high exchange rate remains a headwind to thetradables sector. The Bank does not believe the current level of theexchange rate is sustainable in the long run.

There hasbeen some moderation in the housing market. Restrictions on highloan-to-value ratio mortgage lending are starting to ease pressure, and risinginterest rates will have a further moderating influence. However, theincrease in net immigration flows will remain an offsetting influence.

Whileheadline inflation has been moderate, inflationary pressures are increasing andare expected to continue doing so over the next two years. In this environmentit is important that inflation expectations remain contained. To achievethis it is necessary to raise interest rates towards a level at which they areno longer adding to demand. The Bank is commencing this adjustmenttoday. The speed and extent to which the OCR will be raised will dependon economic data and our continuing assessment of emerging inflationarypressures.

Byincreasing the OCR as needed to keep future average inflation near the 2percent target mid-point, the Bank is seeking to ensure that the economicexpansion can be sustained.

What a Joke inflationary pressure(last I heard we were running at 1.4%)

increasing the OCR increasing all debt holders costs and decreasing incomes for Exporters (the Backbone of the NZ economy) personal thanks to the high NZD dollar and OCR I will be round 20% worse off at current increases in rates and decreases in export prices....and worse of all thats just the start :(

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Originally Posted by turmeric

Pedantic I know, but 1.6% and rising.

Genesh Nana has been on various TV shows and radio stations airing his views. He is well respected and is arguing the projected rise is to far too fast. I'm not averse to the 25 basis point rise, it's the projected 200 point rise over two years which I think is concerning. Ganesh seems averse to any rise at all at this stage.

Worth trying to track down one of Ganesh's interviews to have a listen to what he has to say. I think he makes a very good case.

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Yeah I'm a big fan of Mr Nana's view point....... from one of his blogs

the 1.6% is well within the 1% to 3% specified in the Policy Targets Agreements (PTA), and further, quite close to the 2% midpoint focus also specified in the PTA. Again, what is the problem?
http://pundit.co.nz/content/the-dark...k-star-economy

---Yes what is the problem ? IMHO what is wrong in NZ currently is the over investment in property the every increasing house-hold debt and the extremely overvalued NZD .....Now increase our OCR is going be bad for 2 out of 3 .....

I see the IMF is talking of negative rates to come...yet here in rockstar economy (rockstar in very few do well while the vast majority of us are getting a right kicking in the mosh pit) so lets keep increasing rates 90-95c USD/NZD .98-1.03 AUD/NZD how many trillions round the world are looking for yield ...if our CB walks the talk NZ banks will be offering 5%-8% yields while many in the western world will be offering peanuts sub 2% etc

The Reserve Bank hiked the Official Cash Rate by 25 basis points to 2.75% and forecast short term rates were likely to rise a further 250 basis points by early 2017 as it moved to dampen inflationary pressures generated by an economy growing faster than potential
https://www.interest.co.nz/currencie...ing-bring-down

Right so our economy is booming ?? what speculative building CHCH rebuild ,Dairy farms and importers .....my family has interests in Farming(not Dairy) and Fishing and we are getting crucified with this high NZD....we surely can't be the only ones .....

Now if many of the fisherman/farmer/Manufacturing business can't make a profit then this also affects other sectors that support them ...
just look at Aus Car Manufacturing demise dragging down thousands of other jobs>>>

Quite simply little old NZ shouldn't be leading the world on interest rates at the demise of NZ jobs just to prove we are this so called ROCKSTAR very Vain IMHO

Much respected commentator Roger Kerr says we have a serious inflation problem and it is only the high NZD is actually keeping inflation down to the reported 1.6%

No wonder Wheeler is worried. Maybe he needs to be even more aggressive

http://www.interest.co.nz/opinion/69...e-major-focus-

Yes exporters will wear the costs of the ---chch rebuild lead inflation costs across NZ ..insurance../housing inflation costs along with non-tradable businesses inflating margins as debt laden kiwi dive further into debt

trades down here are flat out busy increasing costs all round for consumers ...
Seems like exporters(tradable sector)must suffer for the excesses of the NZ and foreign consumers
And until the mightn't cow milkers cry foul no one in power really gives a hoot about a high NZD

Wow heard of 4.25% fixed for one year through BNZ today ...not long before we see sub 4% fixed 2yrs etc ....Should hopefully spur buyers of Our Queenstown property for sale @1.1mill House will return 5.5% if rented out at current market rates and it only 4yrs old high spec etc...certainly see NZ Property continue to be Strong Buy ,,,when you can get the renters to pay all the costs and have a good upside to double your 10% etc deposit over a couple years in the high Cap growth areas of NZ

Hmmm...Any more continuing recoveries in Milk solid futures combined with continuing OK growth in the NZ economy may see interest rates bottoming out...Large jumps on the 5yr (+1.63%) and 10 yr (+1.81%) Interest rate swaps today tells us that Mr Market thinks the better than expected Dairy auction is a positive for future NZ economy.

SBS now has 3.99% 1yr fixed !!! wow

Re-fixing my mortgage for the first time. Currently locked into a 6.09% rate. Looking at fixing 50% for 1 year 4.15%, and then 30% for 2 years and remainder floating. Thoughts on this plan? I think interest rates should drop again and be at there lowest this time in a year, but then Ive learnt you can never know whats going to happen

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Originally Posted by skeet

Re-fixing my mortgage for the first time. Currently locked into a 6.09% rate. Looking at fixing 50% for 1 year 4.15%, and then 30% for 2 years and remainder floating. Thoughts on this plan? I think interest rates should drop again and be at there lowest this time in a year, but then Ive learnt you can never know whats going to happen

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hard to know that's for sure ,, looks like rates will be forced lower from the "Reserve Bank" ....but major Aussie banks also have issues round bad loans in the resources sectors and if the house market does fall in Aus property Bubble(and NZ) we could well see rates for these banks credit lines internationally go higher on credit downgrades etc >>

Am looking to take on my debt in the near term I will be only fixing for 1yr and be hoping for round 4% as I'm looking to change banks(sick of Westpac) and get the cash incentive (which can run round 500-1000k per 100k loaned 2yr+ fixed etc)

If you haven't signed up the new loans yet skeet I'd be calling round to the likes of ANZ,WP,BNZ,SBS and just see want they offer to entice you to their loan book ...then play of the best deal to your bank and see the rate drop ..

RBNZ today held rates, but can see them being lower in a year than they are today. Currently with ASB and it is easier to stay than move, may do the ring around later today. With the current rates I would be looking at $171 extra in the hand so to speak, although this will then be put against our floating anyway.

right if the loan isn't that big then it's not really worth it ....300k+ and it does become worth it

If yah wanted to know how I got on. 200k @ 4.19% for 2 years, 100k @ 4.25% for 1 year with ASB. Bal floating.

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Originally Posted by skeet

If yah wanted to know how I got on. 200k @ 4.19% for 2 years, 100k @ 4.25% for 1 year with ASB. Bal floating.

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Funny how different jurisdictions look at things differently. Was recently in Holland where my peers were talking about the option to fix for 10 years or fix for 20 years. The 10 year rate was 2.2% the 20 year rate 2.8%. My mate went with the 20 year rate on his new house.
Wonder why we do not get these types of terms to be able to fix in NZ or at least why they are not common?

Wonder what the penalties would be if you broke it?

EDIT: A quick google http://money.stackexchange.com/quest...in-netherlands shows the cost is very high! Above example of a euro 30k penalty to break a 10 year mortgage that is currently @ 6%! Must remember EU current interest rate is 0%. It may be possible that NZ ends up with 10-20y mortgages if we head this low.

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Originally Posted by skeet

Wonder what the penalties would be if you broke it?

EDIT: A quick google http://money.stackexchange.com/quest...in-netherlands shows the cost is very high! Above example of a euro 30k penalty to break a 10 year mortgage that is currently @ 6%! Must remember EU current interest rate is 0%. It may be possible that NZ ends up with 10-20y mortgages if we head this low.

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Thats right. My cousin has a 150k Euro mortgage at 5.1% fixed for 10 years and has currently got 5 years to go. His penalty is 18k if he were to break it but he is considering doing so.
But the concept of longer fixing periods is interesting, it would be good if NZ had the option as it gives you more scope as a borrower.

Its interesting, I wonder how long do Kiwis own houses compared to the rest of the world? Im in my first home and I think a 2 year mortgage is long at present. Maybe my thought process will change once I buy something bigger that would suit my longer term plans.

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Originally Posted by blackcap

Funny how different jurisdictions look at things differently. Was recently in Holland where my peers were talking about the option to fix for 10 years or fix for 20 years. The 10 year rate was 2.2% the 20 year rate 2.8%. My mate went with the 20 year rate on his new house.
Wonder why we do not get these types of terms to be able to fix in NZ or at least why they are not common?

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One of the reasons it is not common is there is nothing for the banks to hedge up against for longer than 10 years , I think 2027 the longest Govt Bond in the market . If there were some longer maturities that were liquid someone might take a look at it . Think HSBC had a 10 year rate a while back , not sure these days .

TSB had a 5.99% for 10yrs awhile ago ...would have been a few thinking that was a ripper of a deal ....but now with two more cuts to come we should well see many short term rates into the 3's