Grant Schlierike

23/12/2022

Well that’s it, the office door is closed till sometime next week or maybe the week after.

To all those customers/clients/friends thank you for your support and roll on 2023.

Merry Christmas and a happy new year to all

24/11/2022

LAST OFFICIAL CASH RATE INCREASE FOR THE YEAR; WHAT DOES THIS MEAN FOR YOU AS A BORROWER? 🤔

The Reserve Bank has just delivered the biggest Official Cash Rate (OCR) hike in 20 years - which now see’s the OCR sitting at 4.25%.

The increase to the OCR means we are likely to see further increases in interest rates as the cost for the bank to borrow money to lend to you and me is now higher. With many mortgages rolling off very low interest rates and onto much higher rates in the next three to six months, borrowers will really need to monitor their spending habits to make sure the higher repayments fit into their budget - i.e a $700,000 loan that was fixed at 2.99% coming off in today's high interest rate environment, would see an increase in repayments of approximately $1,300 per month. So it's going to be a matter of prioritising the wants and the needs to make sure you are able to afford that extra mortgage repayment.

How can you prepare for future OCR increases? 🤔

As the OCR is used as a tool to get inflation under control i.e back to a nice 1%-3% (we are currently sitting at 7.2%), we can probably expect further increases to the OCR in 2023 while the Reserve Bank tries to get things under control.

Kiwi’s have been advised all year to spend carefully, budget and save as living costs continue to rise.
To prepare for future OCR increases we are advising our clients to start financially preparing for the higher rate 6 months out from expiry.

For borrowers that may struggle with the change, we will need to do a thorough analysis, and consider options such as increasing loan terms, consolidating any short term debts, or potentially refinancing to take advantage of cash incentives to subsidise the extra repayments.

We aim to get our clients through this stormy period with good budgeting advice without the need to resort to interest only or mortgage repayment holidays.

This increase to the OCR has been very well publicised in the media and as such, I hope that more and more Kiwi's reach out to an expert Mortgage Adviser for help and guidance, as they navigate how to structure their mortgage and finances going forward.

There is a lot of uncertainty out there at the moment and in today's environment, quality advice is more important than ever.
Be rest assured, the golden weather will return, and we want to make sure all of our clients are covered and in a good position to take advantage of the market when it does.
Cheers,

09/11/2022

To Fix,Float or Split that is the question ????

If you are among the 60% of borrowers that have fixed rates expiring on their mortgages within the next few months you might want to look very closely at how you are going to restructure things for the coming years.
The most common question we get asked at the moment is: how long should I refix for?

The answers always differ for each individual, but the formula of how to get there remains the same.
👉 What is your affordability looking like?
👉 What are your financial goals for the next 1-5 years?
👉 Are you looking to move or sell your property?
👉 Are you expecting a pay rise?
👉 Are you expecting a new addition to the family?
👉Are you taking on more financial responsibility by helping aging parents?
You can start to see the picture here. These types of questions will form the basis of a financial plan and the plan will form the basis of how we look to structure your mortgage.
Spreading your risk by splitting your mortgage. 🏡
Rather than fixing your entire mortgage for the same period, a lot of clients choose to split it out across multiple fixed rate periods - for example one, two and three years. This creates more opportunities to relook at your budget and reassess your repayment structure. You could also consider putting some of it on a floating interest rate.
By splitting your loan, you'll soften the blow of market changes and ensure your entire mortgage isn't maturing at the same time. That way your repayments shouldn't suddenly increase by such a large amount, and you'll effectively be getting the best of both worlds.
Another advantage of splitting your mortgage is that it allows you a great deal of flexibility in how you manage your loan: the fixed interest rate portion gives you the security of stable interest rates and repayment levels, while the floating interest rate portion allows you to take advantage of loan features such as additional repayments and redraw facilities.

If you have a mortgage coming off its fixed rate term shortly,make sure you get in touch so we can put a plan in place.

21/01/2022

Commentary from ANZ on the mortgage rates & future prospects:
MORTGAGE BORROWING STRATEGY

Average mortgage rates are unchanged compared with last month. Although this is the first month of no changes seen since rates started rising in the middle of last year, with the OCR on track for 3% (from a current level of 0.75%) and wholesale rates up sharply since the beginning of the year, mortgage rates are likely to remain on an upward trajectory for the time being. It is not just local interest rates that are on the rise, so too are global interest rates, and that brings with it the risk of higher longer term wholesale and mortgage rates. When we look at where breakevens sit, now that we expect the OCR to go much higher (we had thought it would top out at 2% but we now think 3%), the idea of fixing for longer now looks more compelling. The 1yr rate remains the lowest rate, but if the OCR reaches 3%, 1yr mortgages are on track for around 5%, and that could make for some expensive rollovers. It may thus be worth considering fixing for 2 to 3 years

18/11/2021

Mortgage commentary from ANZ received,worth thinking about:

MORTGAGE BORROWING STRATEGY

Fixed mortgage rates have continued to rise rapidly, with 1 to 5 year rates up up between 0.26% points and 0.45% points. These moves followed progressively larger increases observed since mid-year, culminating in the largest 6-monthly rise in fixed rates in over 15 years.

Unfortunately, none of the choices right now are attractive. If you fix for a shorter period now, you’ll probably end up paying
more when you re-fix later.
Alternatively, if you fix for longer now, you’ll pay more immediately.

The opportunity to beat rate rises has likely now past, and if the choice is between 1 or 2-years, on balance we prefer the 1-year. Fixing for 2-years now could end up being cheaper in the long run if we see hefty further increases, but now that market interest rates have already moved, that may not happen.

The 1-year is also still the cheapest rate, and while we expect it to increase as the RBNZ hikes the OCR, we still prefer it to floating or 6-months, as these rates are already higher than the 1-year and are also set to rise as the OCR goes higher.

29/10/2021

New tax rules for property investors: What you need to know



The government has recently published draft legislation, which provides more detail on how the scheme will work. Here’s an overview of what you need to know.

What do the tax changes mean?

The draft legislation removes property investors’ ability to deduct mortgage interest from taxes on rental properties. However, new build properties are exempt from the changes.

When do the changes come into effect?

Investors can no longer claim deductions on existing properties bought after 27 March. Deductions for existing properties bought before that date are being phased out between 1 October 2021 and 31 March 2025.

The phasing out of interest deductions works as follows:

Date interest incurred % of interest you can claim
1 April 2020 – 30 September 2021 100%
1 October 2021 – 31 March 2022 75%
1 April 2022 – 31 March 2023 75%
1 April 2023 – 31 March 2024 50%
1 April 2024 – 31 March 2025 24%

What is a new build?

There’s now more clarity about what is a new build. Investors can deduct interest on properties that received a code compliance certificate (CCC) on or after 27 March 2021. And it also covers existing properties that are converted into several new dwellings, plus commercial buildings converted into residential use.

How long is the new build exemption?

The exemption remains for up to 20 years after the property receives a CCC. Furthermore, the exemption applies to both the initial and subsequent purchasers within the 20-year period.

What about build-to-rent developments?

Build-to-rent developments are included in the 20-year exemption. What’s more, the government has hinted it’s considering extending the exemption for these developments beyond 20 years.

Can I continue claiming interest deductions on my bach?

The rules apply to interest on residential properties rented out some of the time and used privately. This is often the case with holiday homes. Unless you qualify for the phased approach because the loan predates 27 March, interest expenses for your bach will be non-deductible from 1 October.

Where can I get more information?

There’s a lot to get your head around. IRD has developed a series of information sheets to explain the changes in detail. Check them out here

The interest limitation proposals released by the Government on 28 September 2021 are part of its overall efforts to address New Zealand’s housing affordability issues. The aim of the proposed measures is to reduce investor demand for residential property.

26/10/2021

Latest piece of rate info from ANZ makes for a interesting read:


Mortgage rates continue to rise rapidly, with average fixed rates up between 0.41%pts and 0.57%pts over the past month. There were two main catalysts for the increases. The first was the RBNZ’s decision to hike earlier this month. Not only was that the first OCR hike in seven years; the RBNZ also warned that further hikes will likely follow.
This was further reinforced by the release of Q2 inflation data, which was much higher than expected, fueling financial market fears that the OCR may have to rise a lot further.

As a consequence, term wholesale rates have moved up sharply, which has in turn driven mortgage rates higher. All rates are now above 3% (on average).
The 1-year rate remains the lowest; it’s also the one we now prefer. It doesn’t offer much time protection, but it’s a lot cheaper than floating. We believe the prime opportunity to fix has now passed, with longer-term rates now much higher and significantly less attractive than they once were.

27/08/2021

On the 18th August the Reserve Bank provided its latest Monetary Policy Statement and left the Official Cash Rate on hold, even though the market tipped between a 0.25-0.50% increase. However, this was clearly due to the unknown nature of what the next few weeks will bring, and how it could impact on our economy.


So, with all of the uncertainty around where interest rates are heading…. What should I do with my mortgage?

Firstly, it’s important to understand that banks obtain funds from many sources (mortgage interest rates in NZ are pegged against the total cost of ‘pooled’ funding that banks have access to at any given time). This total ‘pool’ of funding can include the likes of:
• Money borrowed from the Reserve Bank of New Zealand - OCR
• Term deposit funds
• Cheque and Savings account - total costs of funds held
• Overseas Markets
Therefore, you need to have both an international and domestic view of what's happening in the world, to help your thought process as to where rates may head.

There is no doubt that inflation is here but what we don't know is for how long. COVID could derail this but it's a big unknown. The reality is no one knows the outcome or what will happen however the overwhelming rhetoric is that rates will start to increase, having fallen for the past 20 years.

As we are dealing with unknowns, what everyone should do is take a breath and look at their own personal situation - as everyone is different and people need to realise that what may be right for them, may not be right for their neighbour.

This has all been really helpful… but now what do I actually do?

• Take a breath
• Think about your current financial situation (both now and into the next 2-3, or maybe even up to 5) years
• Decide on your own risk tolerance
• Look to lock in a rate / term that feels right to you (and know that you can’t control the interest rates so there’s never going to be a ‘wrong’ move if it’s the right move for you
• Realise the power of increasing your home loan repayments (additional repayments of as little as $200 per month could save 4 years off a $500,000, 30-year home loan paying 5% interest)

28/07/2021

Some commentary from ANZ received today on a possible borrowing strategy going forward:

MORTGAGE BORROWING STRATEGY

Average fixed mortgage rates offered by the four major banks all rose over the past month, with the biggest lifts seen in 1 and 2-year rates, and lesser rises seen in 4 and 5-year rates. The 1-year rate remains the cheapest rate, and at around 2½% it is still relatively low by historical standards. However, the average 5-year rate is now a shade above 4%, a level not seen since before the COVID crisis struck. The current term structure of mortgage rates poses a real challenge to borrowers. That’s because longer-term rates are now much higher, but equally, if you fix for 1 year, it’s very likely going to cost more to re-fix in the future. Our break even analysis shows that it might be marginally cheaper to fix for 2-3 years but it’s a close call. The choice will depend on whether you prefer certainty or else think there’s a good chance the RBNZ won’t need to hike by as much as markets are expecting.

27/06/2021

ANZ have announced a new build product with a floating rate at 1.68% for new & for customers currently working through the build process......the announcement below:

ANZ announces 1.68% floating rate on new builds

ANZ Bank New Zealand (ANZ NZ) has announced a 1.68% floating rate on new builds,
which is a 2.76% discount on the current floating rate, and the lowest rate in the market.
Called “Blueprint to Build” the discount will be available for 24 months on the standard
floating rate for new builds, and builds that are already underway. The standard floating
rate may move over time in line with market conditions.
ANZ NZ will contact its customers who are currently working through a build process to
restructure them on to the low-rate offer should they wish to do so.
“As New Zealand’s largest lender the current housing market continues to concern us
because home ownership is getting beyond many,” ANZ NZ Managing Director Personal Ben
Kelleher said.
“New Zealand’s fundamental problem is one of supply and demand. Making it more
affordable for people to fund new builds is one way we can contribute to increasing supply in
the market.”
As part of the offer ANZ NZ will offer up to $3000 as a cash contribution for first home
buyers and for those customers building a 6+ Homestar rated home. A 6+ Homestar rating
and above recognises a home that has been built at or above the current standards set by
the New Zealand building code, dependent on location across New Zealand.
“In December, ANZ NZ was the first bank to require a 40% deposit from residential property
investors as a step to bring balance to the housing market,” Mr Kelleher said.
“This, combined with other banks following suit and Government initiatives, has resulted in
fewer investors coming into the market. This has taken some froth out of the market.
“The ‘Blueprint to Build’ initiative is another step we’re taking to help more Kiwis on to the
property ladder and to increase the stock of healthier homes.”
The offer will be available to ANZ customers effective 5 July 2021; eligibility criteria will
apply.