Mortgage Lab - Adviser Steve Bennett

Mortgage Lab - Adviser Steve Bennett Financial Adviser - Mortgages & KiwiSaver

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"Renting vs. Owning: Which is Right for You? 🏡💼Are you torn between renting and owning your own home? Let's break it dow...
04/06/2024

"Renting vs. Owning: Which is Right for You? 🏡💼

Are you torn between renting and owning your own home? Let's break it down: "

03/04/2024

in February, the percentage of mortgages in arrears rose to 1.51%, with 22,600 mortgage holders falling behind on payments, the highest level since January 2020 according to Centrix data. Non-performing home loans at 90+ days past due have also increased significantly over the last three months, with a 44% year-on-year rise. While early arrears have remained stable, mortgage arrears are increasing for loans opened during the period of OCR rate hikes since October 2021.

Additionally, 30+ days arrears at 24 months have gone up from 0.2% to 0.5% in the past two years. Mortgage applications are down by 6% compared to the same period last year, with sales volumes staying low. However, new mortgage lending saw a 5% increase in February compared to the previous year, despite cautious buyer behavior. Non-mortgage lending has decreased by 4% year-on-year due to fewer new vehicle loans. Overall, new household lending is up by 3% year-on-year. The situation is uncertain for the year ahead, but there are reasons for cautious optimism according to Centrix managing director Keith McLaughlin.

Credit arrears are showing signs of improvement, with the number of people behind on payments decreasing by 23,000 month-on-month to 457,000. Despite this positive trend, the bigger picture shows arrears are 8.1% higher year-on-year. Arrears are rising for mortgages, personal loans, and buy now pay later products as debt and financial stress increase. Vehicle loan applications are down by 16% year-on-year, reflecting a decline in new car sales. Sectors like hospitality, retail, and transport have seen a significant increase in business credit demand, but the hospitality sector faces ongoing challenges.

Defaults in the property/rental sector have doubled year-on-year, with retail trade, transportation, and construction also experiencing increases. Pubs, bars, restaurants, and cafés are particularly at risk due to weak customer demand, rising costs, and staff shortages. The hospitality industry in New Zealand is facing high failure rates, with 17 hospitality companies filing for liquidation in February.

29/03/2024

In February of this year, new mortgages totaled $4.9 billion, marking a significant 44% increase from January's $3.4 billion. The seasonally adjusted value also saw a 4% rise from January. Both the number and value of mortgages lent have increased, indicating a market trend towards normality. However, data from the Reserve Bank suggests that investors have not yet re-entered the market substantially. First home buyers remain active, although their numbers are declining as many await potential interest rate drops. While the Reserve Bank does not anticipate cutting the OCR until next year, some major banks predict cuts starting as early as November this year.

Financial markets have already factored in interest rate reductions for this year. The share of new mortgages to first home buyers decreased to 22.6% in February from 24.1% in January, but this represents a year-on-year increase from 21.3% in February last year. The share of new mortgages to investors slightly dropped to 17.3% from 17.8% in January, yet it is up by 1% from February last year. The average mortgage loan size has risen to $341,533, a 3.4% increase from January and a 2.1% increase from February last year. Notably, investors are now taking out smaller mortgages, with the loan size decreasing to $481,063 in February. The share of new mortgages to other owner-occupiers increased to 58.6% in February, up from 56.6% in January, and significantly higher than the 60.7% share in February last year.

The value of new mortgages to first home buyers surged by 36% to $1,109 billion compared to $815 million last February. For investors, the value of new mortgages increased by 35.9% to $851 million from $626 million last year, and for other owner-occupiers, it rose by 23.7% to $2,880 billion from $2,329 billion last year. A total of 14,391 new mortgages were written in February, up by 39.3% from January. Compared to February last year, the number of new mortgages written increased by 25.5%. The number of new mortgages for a change in loan provider rose by 17.4% compared to February last year and by 44.5% compared to January this year. Additionally, top-ups and property purchases saw increases of 28.7% and 34.2%, respectively, over the same period.

25/03/2024

One adviser criticized ComCom chair John Small's comments as another example of those in legislative and compliance roles being out of touch with reality. Some readers objected to Small discussing mortgage brokers, now classified as financial advisers who must have passed Level 5 of the New Zealand Certificate in Financial Services. Small was urged to undergo a Level 5 advice course for better understanding. Small expressed concerns about brokers not adequately disclosing conflicts of interest, emphasizing the need for closer monitoring and guidelines by the Financial Markets Authority.

Some advisers noted that current legislation requires disclosure of commissions and bank affiliations, with little variation in commission rates among lenders. They emphasized operating with integrity and prioritizing customer needs. Criticisms of Small included accusations of ignorance and bias towards government-owned Kiwibank. Some advisers questioned the effectiveness of providing Kiwibank with more capital to disrupt major banks.

22/03/2024

The Commerce Commission (ComCom) has released its draft report on banking competition, which includes 16 recommendations aimed at promoting a fair playing field. The Reserve Bank is urged to enhance this fairness, while the Financial Markets Authority is advised to focus on addressing conflicts of interest among mortgage brokers. Additionally, the government is encouraged to expedite progress towards open banking by setting a deadline of June 30, 2026. ComCom also advocates for providing Kiwibank with additional capital to foster its role as a disruptive force among the major banks.

The review of legislation such as the Credit Contracts and Consumer Finance Act (CCCFA) and the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act) is suggested to alleviate barriers to competition. The New Zealand Banking Association and the Financial Services Federation (FSF) support these initiatives, emphasizing the importance of empowering non-bank lenders to enhance competition and innovation in the banking sector. The FSF stresses the need for a level regulatory playing field between banks and non-banks and the acceleration of open banking.

Various banks, including Westpac and Kiwibank, are set to provide feedback on the draft report, with a focus on considering both the benefits and potential drawbacks of proposed changes. ASB chief executive Vittoria Shortt highlights the significance of maintaining financial system stability and safeguarding customer funds and information while evaluating the competitive landscape outlined in the report.

18/03/2024

In a recent submission to the Reserve Bank regarding its DTI proposals, the association highlighted potential impacts on owner-occupier borrowers under the proposed DTI of six with a speed limit of 20%. They suggested setting a higher limit of at least 25% for this group to accommodate additional bank conservatism. The NZBA, comprising 18 registered bank members, now supports DTIs after previously opposing them, citing concerns about adverse customer impact.

The association also emphasized the need to relax loan-to-value ratios for investors and proposed a higher speed limit of 30% for borrowers with higher DTIs. They emphasized the importance of open communication to assess any unforeseen operational impacts of DTIs once implemented. Public education was deemed crucial to dispel misconceptions about DTIs potentially hindering lending, especially for first home buyers. The association called for clarity from the RBNZ on potential biases towards high-income earners and small businesses.

Key points requiring clarification included banks' discretion in lending within DTI settings, prescribed questioning requirements, and the use of historical data for DTI calculations. The RBNZ is expected to finalize its decision on DTI implementation in June, with operational readiness anticipated by April 1st, and potential DTI restrictions enforced no earlier than July. This phased approach aims to allow banks sufficient time to adjust their systems and adapt to the new regulatory framework effectively.

15/03/2024

Clients have been reaching out to me expressing their frustration with the poor service levels of their insurance providers when they attempt to handle things on their own. This often leads to concerns about the quality of their coverage and its reliability. It's understandable for clients to question the effectiveness of their insurance given the lack of service they've experienced in other industries like retail, telecommunications, and utilities. Several insurance companies, such as Fidelity Life and Southern Cross, have faced criticism for their communication and service issues. It's clear that there are ongoing challenges in the insurance industry, exacerbated by the impact of Covid-19.

Improving operational efficiency and investing in better systems and staff training are crucial steps to address these issues. Proper documentation of processes is essential to ensure consistency and quality in service delivery. Insurers must prioritize operational excellence to regain consumer trust and ensure policies function as intended. It's important for insurer management to support their staff with clear processes and efficient operations to prevent avoidable failures and maintain employee morale. Adapting to the new normal post-2020 is essential for the insurance industry to thrive in the changing landscape.

15/03/2024

Former mortgage adviser Natalie Carter has been given a 12-month home detention sentence for forgery and violations of financial markets legislation. Carter, who previously worked as a mortgage adviser in Hawke's Bay, was sentenced as a result of a criminal prosecution initiated by the Financial Markets Authority (FMA).

She recently pleaded guilty to the charges and received her sentence this week for this clause :

Forgery (x3)
Obtaining credit by deception exceeding $1000 (x2)
Attempting to obtain credit by deception exceeding $1000 (x2)
Using a forged document (x2)
Deceived or attempted to deceive or knowingly mislead the FMA
Making a false or misleading statement

Judge Gordon Matenga found her guilty on all counts and initially sentenced her to imprisonment, but this was later changed to 12 months of home detention after taking into account various factors. Margot Gatland, the FMA Head of Enforcement, highlighted that Carter's fraudulent actions were carefully planned, using her position and expertise to manipulate loan applications and documents to bypass lending requirements. This not only violated ethical standards for financial advisers but also posed a risk to industry trust.

Consequently, Carter is now prohibited from holding a directorial role or participating in company management for five years. Additionally, she is banned from providing financial advice services for the same duration under the Financial Markets Conduct Act. Gatland emphasized that these measures are necessary to protect the public and deter similar misconduct in the financial services sector.

13/03/2024

KPMG's recent survey of 27 banks covering the period from October 1, 2022, to September 30, 2023, revealed uncertainty regarding potential government actions concerning the Credit Contracts and Consumer Finance Act (CCCFA) and the Conduct of Financial Markets (Conduct of Institutions) Amendment Act (CoFi). Most banks have already implemented or are in the process of implementing necessary procedures, raising concerns about potential costs if the current legislation were to be revoked. The banking sector's preference is for the government to enhance efficiency and streamline existing regulations to create a more favorable environment for banking operations while retaining key elements of the current laws.

Participants in the survey agreed on the importance of protecting vulnerable borrowers but expressed dissatisfaction with the CCCFA's failure to meet foundational objectives. Suggestions for improving the legislation included reducing penalties, establishing a "safe harbor" for self-reporting and issue rectification, and providing clearer guidance on interpretations. The survey highlighted challenges related to regulatory costs, unclear government messaging on CoFi, and the need for clarity on reporting requirements. Despite a marginal increase in profitability for banks during the survey period, there were notable shifts in net interest income, non-interest income, operating costs, and impaired assets expenses.

08/03/2024

House prices experienced a 16% decline in nominal terms from the peak in November 2021, with inflation exacerbating the drop to a more significant 25% in real terms. To return house prices to their 2010 levels relative to wages, a halving of prices would be necessary, according to Zollner. Achieving 1992 price levels would require a 70% decrease, raising questions about public acceptance of such drastic adjustments. Housing Minister Chris Bishop aims to establish homes priced between three to five times household incomes over a 10 to 20-year period by increasing housing supply and density. Despite challenges, Zollner notes that debt servicing ratios remain lower than pre-GFC levels.

Consumer confidence is low due to inflation, although wages have kept pace. The household sector shows resilience, with some individuals facing mortgage payment increases. The Reserve Bank's OCR peaked at 8.25% in 2007 and remained until 2008. The current OCR's peak at 5.5% is contingent on inflation trends. Zollner's prediction of an OCR hike was incorrect, as the central bank's recent monetary policy statement revealed a more dovish stance.

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