Shayne Gough Mortgage Adviser

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Shayne Gough Mortgage Adviser

Passionate about property, the right mix of skills to guide you, point out structuring opportunities & know when you should seek expert advice 0277788854

I operate as a Financial Advice Provider under a current license issued by the Financial Markets Authority in the name of NZ Financial Services Group Limited (FSP 286965). Publicly Available Disclosure Information & Privacy Policy can be found on my website shaynegough.com

04/12/2019

More Capital
The Reserve Bank has just announced that Banks will be required to hold a lot more capital to make the banking system safer.

This means that they will have to find over the next 7 years
about another 20 Billion.

Where will most of this money come from?

From the Shareholders? Maybe

Reduced Profits? I don’t think so

Increase interest rate? Most likely!

24/11/2019

The Government is planning to amend the Residential Tenancies Act again!

• Limiting rent increases to once every 12 months
• Removing a landlord’s right to use no cause terminations to end a periodic tenancy agreement.
• Making rental properties safer and more livable by letting tenants add minor fittings.
• Improving compliance with the law by increasing financial penalties

By far the most contentious is removing no cause terminations (currently landlords can issue a 90-day notice to end the tenancy for any reason) this will make it a lot harder to remove tenants for e.g. anti-social behavior particularly towards neighbours.
Landlords will increase the use of fixed term tenancies and vetting of potential tenants. They will not be prepared to take the risk making it harder for the socially deprived to find accommodation and driving them towards the ever-increasing state housing queue.

Over the last couple of years, I have noticed a trend for landlords to move out of lower priced property and into newer more expensive homes which comply with all the new requirements, attracting a better quality of tenant and a higher rental. These new amendments will increase this trend, thus making the problem of affordable rentals worse.

12/08/2019

Negative Interest Rates, something from Alice in Wonderland?

With the Reserve Bank cutting the Official Cash Rate (OCR) to 1.0% we are moving closer to the weird world of negative interest rates.

Negative interest rates refer to a scenario in which cash deposits incur a charge for storage at a bank, rather than receiving interest income. Instead of receiving money on deposits in the form of interest, depositors must pay regularly to keep their money with the bank, that is you invest $100 and get $95 back!

In addition, you need to take into account inflation; if deposit interest rates fall to 2.0% and with an inflation rate of 2.0% you are very close to being negative in real terms. Negative interest does currently exist in some parts of Europe.

The theory behind all this is to stimulate economic activity. Banks will be encouraged to increase lending, making it easier to borrow money which will then be spent on goods and services and increase economic activity. However, negative interest rates can also lead to “asset bubbles”, people looking for higher returns start to buy other assets such as property, shares, gold, or anything with a return greater than zero and thereby push the price of these assets up to unrealistically high levels.

As Alice said “Curiouser and curiouser!”

07/08/2019

How low will interest rates go?

The Reserve Bank has just dropped the Official Cash Rate (OCR) by .50% for the second time this year to a record low of 1.00%, If these cuts were passed on to borrowers in their entirety, you could expect to mortgage interest rates closer to 3.0%

But as more cuts have happened, less of the reduction has been passed through to the rate borrowers pay. When the Reserve Bank last cut the official cash rate by 25 basis points, only about half of that drop flowed through to mortgage interest rates. Where the official cash rate goes does not mean mortgage rates are going to follow, the closer to zero the official cash rate gets, the less of an impact it has on mortgage rates.

This is because banks need to attract local deposits to fund the mortgages. There is only so much money banks can borrow offshore without their credit rating been downgraded. Currently about 72% of bank funds are sourced domestically. The banks need to offer rates that makes it worthwhile for people to put their money in the bank. With the recent reductions in term deposit rates banks have already seen the growth in deposits slowing down. If term deposit rates fall too low people start to look at other options which then starve the banks of funds and reduces how much they can lend.

01/08/2019

Looks like the Regions are hot!
The main centres used to drive New Zealand’s market but it was strong provincial markets that contributed to the national average asking price’s rise in July.

Realestate.co.nz’s latest data shows the national average asking price was up by 1.6% to $669,941 in July, as compared to June 2019.

Provincial markets played a major part in the increase with four regions seeing all-time asking prices highs in July.
First among those regions was Taranaki, with an average asking price of $475,424 in July, which is up 11.6% on June where new listings have dried up.

The other regions to hit all-time highs were Otago (up 11.2% to $454,727 from June), Hawke’s Bay (up 6.8% to $579,647 in June) and Southland (up 6.7% to $373,897 from June).
New listings were also down in all these regions.

While provincial markets were the stars in July, the Auckland market also showed signs of life with the region’s average asking price up 1.5% to $928,152, as compared to June.

06/06/2019

The insurance market in New Zealand is changing.
Insurers are moving to “risk-based” pricing, that is customers in areas that are more prone to natural disasters and severe weather events will see premiums rise, while customers in lower risk areas will likely pay less. Historically Home and Contents insurance pricing was predominantly based on the value of the property, the higher the house value the higher the premium with little consideration given to the risk or the likelihood of a claim being made.

Due to the impact of climate change related weather events and the recent earthquakes, New Zealand’s environmental risks have increased, so insurance strategy is changing to take into account these growing risks with insurers looking to limit their exposure.
The extreme weather claims bill in New Zealand for insurers in 2018 was $226m and the past two years have been in the top three most expensive years on record. Christchurch properties are harder and more expensive to insure and IAG has recently announced that they will not issue new insurance contracts for properties in Wellington.
Insurers now have increasing amounts of data available to them about the risks they take on, which allows them to make more specific decisions. In the not too distant future insurers may make property by property risk assessments. They may start to consider factors such as
• how close is your property to the beach front or river/creek?
• is your property low lying?
• is your property prone to flooding due to run off from your neighbour?
• Is your property located near the top of the hill or exposed to high wind?
• are large trees located close to your house?
• is your water supply via mains or tank?
There is also a domino effect - as some insurers become more specific about charging for actual risk, others will have to follow suit. If, as an insurer, you don't risk-rate then you risk being selected against. That is, your competitors, if they do risk rate, will cherry-pick the safest risks and you will end up with only the higher-risk customers. This is why insurers need to do their best to estimate the true risk that each policyholder brings to the pool."
All this will have an impact on the housing market. If it became known that a particular property was very expensive or difficult to insure, it would reduce the properties market value. If you cannot insure a specific house, it will be harder to sell as banks will not lend on a house that is uninsurable.
Changes to EQC cover are also having an effect on the market. As of July, it will cover up to $150,000 for buildings, up from $100,000 now. But will no longer offer any contents cover. This means insurers' exposure to domestic building risk would decrease and contents risk would increase, which may affect insurers' appetites.

22/05/2019

Free Money, make sure you get your share!

Yes, that right there is free money being given away by the Government and a lot of people are not claiming it.

KiwiSaver members have until the end of June to make sure they qualify to receive the government’s annual contribution of $521.

As long as they’ve contributed at least $1,043 in the year to June 30 they’ll receive the full amount from the government. The $521 will appear in their KiwiSaver account in July or August.

It has been estimated that over a KiwiSaver member’s working life the government contribution could be worth as much as $36,000 which is a real boost to your retirement savings!

Last year $785 million, or 47% of the money the government allocated for its contribution to KiwiSaver members went unclaimed which is a lot when KiwiSaver now has close to 3 million members and almost 50 billion invested.

18/12/2018

You may be surprised at how different banks view applications differently. The secret is knowing each bank’s criteria, where the “grey areas” are and how to tell the story so as to highlight a client’s strengths. This is where a broker is invaluable.

Meet Nina and Anton

They were referred to me by a real estate agent. They had a mortgage approved by their existing bank but were have trouble finding a property that met their needs within the amount approved. As they have young children at day care the amount they could borrow had been reduced by the bank.

After meeting and undertaking a full review I was able to get approval from another bank for a substantially higher figure.

Nina and Anton have now purchased a property just in time for Christmas!

10/12/2018

Meet Jayne & Zac

They were referred to me by a friend of theirs as they wished to purchase their first home together.
As Zak is a builder, they were looking for something that over time they could add value to. Both have very good KiwiSaver balances together with some savings.
However, the problem is Zac has had a prior interest in property as part of a family arrangement and therefore is not a first-time buyer. This means he is ineligible to withdraw his KiwiSaver funds or get the Government Home Start grant.

After meeting and discussing their circumstances the good news is that Zac would be able to use his KiwiSaver and qualify under the “Second Chance” provision.

Once we got this sorted, they then went out into the market and negotiated the purchase of a great property that will not only meet their needs for the next few years but will make an excellent rental property when they decide to take the next step up the property ladder.

Well done Jayne and Zac.

28/11/2018

Are We There Yet - When will interest rates bottom out?

The banks have come out with sub 4% “spring specials” but will it last? To answer this question, you need to differentiate between floating and fixed interest rates.

Floating rates are influenced by what the Reserve Bank does with the Official Cash Rate (OCR), whilst fixed rates which are the most popular in NZ, are influenced by the OCR and what happens in overseas markets, particularly the US.

The outlook for the OCR, which has been unchanged for 2 years, is dependent on how the Reserve Bank sees the NZ economy going. It’s a 50/50 call which way the OCR will go this side of 2020 as inflation is higher than expected, business sentiment is low, economic growth is better than expected, unemployment is at record lows.

In the US interest rates have been rising and further increases are expected. This is due in part to the rising US Govt deficit due to tax cuts and increased Govt expenditure under President Trump. This deficit needs to be funded and this increases interest rates.

My best guess is that we are near or very near the bottom of the cycle. Once the spring specials end, which will be in the next few weeks, rates will be back above 4% which the possible exception of a 1 year fixed rate.

22/08/2018

I think I am in the wrong business.

I‘m in the process of doing house renovations, of which a portion, about $35,000 requires council consent.

Total consent charges are$4,000 this is over 10% of the estimated cost. The council took almost 10 hours to review the application, charged an hourly rate of $192, plus over $1,800 for site visits when I live less than 10km from the council office!

I have been trying to work out how the council justifies these charges. I don’t know a single Tradie charging anywhere near this. It also exceeds many lawyers, accountants and other professionals charge out rates.

There seems little connection between the cost of the consent to the actual cost of the completed work. How can compliance be charged out at 3 times the hourly rate of the builder who is doing the actual work?

I feel that the council has a complete lack of appreciation for what the home owner has to earn to pay the consent cost, $192 per hour equates to an annual salary of over half a million!

One can only wonder what level of inefficiencies, charged by a monopoly provider, this rate is hiding?

Yep I think I am in the wrong business!

Address

1/2 Rangitira Avenue, Takapuna
Auckland

Telephone

+64277788854

Website

http://www.shaynegough.com/

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