Negatives.........
The world financial markets in turmoil.
The New Zealand economy in recession.
House Prices are expected to fall further.
Unemployment set to rise.
We are officially in recession.
No more positive balance in the Government coffers we are now in deficit.
Positives...........
Inflation is now under control again. (no-ones spending so prices had to fall)
Interests rates on home loans are expected to fall.
We have a small tax benefit.
Election looming.
Oil prices have dropped.
Well if your job is safe I guess your current mortgage is looking like it is getting to be cheaper over the next few months, unless of course you have it all fixed.
If property drops 25% in value you can expect your bank to drop you a line if your borrowings are over 70% of current value because your loan balance may soon equal your property value and the banks do not feel comfortable if their is nothing by way of asset to stop you walking away from the house and the mortgage.
This is definitely NOT a good time to buy those rental properties in fact the Rabo Bank offer on their investments which guarantee a max 30% tax looks better every day.
If you really must consider buying a rental property then do NOT use those dreaded consultancy companies or you will really struggle, they make thousands of dollars from you for doing what you can basically do yourself. Don't believe me! then if they offer you an investment property check their price against local Real estate sales and private sales on the internet, you will save yourself between 10K and 20K and of course that would be an initial loss to start with, this means that if the value drops then you are certainly putting your home at risk because the bank will look at the asset value of both the investment property and your home and a total entity.
The NZ banks may not guarantee your deposits (it is in consideration but don't hold your breath) however the NZ banks are very stable and in a good position so the risk of loss is very small.
Taking into account the current loss of value of some of our nations best performing companies if looking through rose glasses this may well be a great time to increase your stock portfolios but be in it for the long term and make sure the companies can survive, talk with your investment adviser and make sure they do the background work.
Money is tight internationally for the banks but there is still a lot of money available for major commercial projects through Global Pension funds and Private Equity Lenders it is just that traditionally most of the developers of such projects have relied on the banks to supply the money and they have forgotten that other avenues exist.
All in all I guess we are lucky being so isolated and small in comparison to other nations, we did not have the major risks with mortgage backed securities and those that did are now gone or on hold. I have to wonder how many investors in those funds actually understood what investments where being made and if their advisors actually explained it to them?
The law has now changing regarding investment advisors and insurance brokers selling products with investment elements, the government is getting pro-active.
Read up on the new laws......
The Financial Advisors Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008
Best advise I can give is
1. to talk to your financial advisor and I mean a serious talk about where to place you money right now.
2. talk to your mortgage broker about your mortgage and see what are the best options for you in the current environment, what was good 6 months ago may not be so good now. Your mortgage should be a living thing updated frequently and not something you set up and forget, well not unless you want to give the bank 3 times your original loan back in interest, I mean, come on, do you really think the bank is going to stop you doing that! If you don't get wise then you pay.
3. Buy your Christmas presents now (if you can afford to) because if the dollar keeps falling those imported toys and goods are definitely going to cost more come December.
Come 2009 my New Years resolution will be to remind myself that simple greed is an infection that can seriously effect every corner of the world.
NZMBA Registered Brokers
Financial Services for New Zealand
Tuesday, October 7, 2008
Monday, August 4, 2008
Banks are playing games.
The banks continue to play game with fixed rates. The OCR drop did not effect the floating rates as many predicted. The NZ Dollar continues a downward trend, some says it is bottoming out others that it still has a way to go.
Banks are playing with the short term 18 months to 2 year fixed rates in an attempt to attract borrowers to fix. This tells me that further drops could be expected in the next 18 to 24 months.
The housing market is still in negative sales territory compared to previous years, bad news continues to hit the market as more and more mortgage backed funds put holds on withdrawals so little if any money is flowing to the secondary lenders.
GE Money has pulled away from the direct broker market put has retained its pathways for broker submissions through its various lending relationships such as General Finance.
Retail is suffering, home owners are suffering and the general election looms on the horizon.
I am so glad I am not having to make thoise awkward calls the reserve bank has to make, it is above my pay scale.
Opinions to date are:
1. If you are struggling with the mortgage then fix at the best rate possible but only after looking at all the options. Remember if you are charged to fix then this can dramatically effect the actual rate you pay when averaged out escpecially on the short term fixes. Again use FEM mortgages and steer clear of the banks.
2. Residential Investment Property is still to be avoided.
3. Do thorough research before investing, despite the market there are still small well run good finance companies such as Gold Band Finance that contiinue to perform.
4. Managed Forex is attractive especially on speculative funds but most managed funds have suffered over the last 6 months. These are high risk investments but can produce great returns - check out www.fxcm.com and view their managed fund options and performances.
5. In a recessive market it is not what you own that matters but what you owe so keep away from those credit cards until things settle down.
6. Keep warm, eat well and be happy, spring is not far away and who knows what the next 3 months will bring.
Banks are playing with the short term 18 months to 2 year fixed rates in an attempt to attract borrowers to fix. This tells me that further drops could be expected in the next 18 to 24 months.
The housing market is still in negative sales territory compared to previous years, bad news continues to hit the market as more and more mortgage backed funds put holds on withdrawals so little if any money is flowing to the secondary lenders.
GE Money has pulled away from the direct broker market put has retained its pathways for broker submissions through its various lending relationships such as General Finance.
Retail is suffering, home owners are suffering and the general election looms on the horizon.
I am so glad I am not having to make thoise awkward calls the reserve bank has to make, it is above my pay scale.
Opinions to date are:
1. If you are struggling with the mortgage then fix at the best rate possible but only after looking at all the options. Remember if you are charged to fix then this can dramatically effect the actual rate you pay when averaged out escpecially on the short term fixes. Again use FEM mortgages and steer clear of the banks.
2. Residential Investment Property is still to be avoided.
3. Do thorough research before investing, despite the market there are still small well run good finance companies such as Gold Band Finance that contiinue to perform.
4. Managed Forex is attractive especially on speculative funds but most managed funds have suffered over the last 6 months. These are high risk investments but can produce great returns - check out www.fxcm.com and view their managed fund options and performances.
5. In a recessive market it is not what you own that matters but what you owe so keep away from those credit cards until things settle down.
6. Keep warm, eat well and be happy, spring is not far away and who knows what the next 3 months will bring.
Wednesday, July 23, 2008
OCR to 8%
The Reserve Bank of New Zealand today dropped the OCR from 8.25% to 8%.
No-one is really expecting this to effect mortgage rates in the short term however DR. Bollar dfid indicate that further cuts may be sooner rather than later.
A lot will depend on the NZ Dollar movement, if it slips too far then this may negate further cuts. Time will tell.
Most of the central banks around the world have the same problem, inflation heading upwards and high interest rates. It will be interesting to see how the NZ strategy works.
Home values are still slipping and fuel prices remain high but we appear to have topped the peak on West Texas Crude but the $20 a barrel drop has not really een reflected fully at the petrol pumps. Most economists expect fuel prices to drop even further as speculation on oil appears to be waining.
Still not a good time to buy your residential investment property, the freezing or payouts from the Hanover group (One of larger finance companies in New Zealand)reflects the problem in the investment market as many developers find it harder and harder to attract buyers in what was traditionally the primary markets like Queenstown.
Home owners are not looking to sell at this time but are taking the rental market option, this is putting extra strain on the current landlords as more and more vacant property hits the market. This will result in lower rentals.
We still believe that you should avoid investment property sales consultants at this time and do your own thing, this will save you many thousands of dollars which can be spent on property improvements that will attract tenants who are an increasing property portfolio to select from.
Summary: - Current market in New Zealand is still recessive.
1. Falling house prices.
2. Finance companies still struggle to find investment capital.
3. Developers struggle to find buyers.
4. High mortgage interest rates.
5. High fuel prices.
6. Inflation trending towards 5%+
7. Labour market gathering momentum for wage increases to cover rising costs.
Home owners should look to refinance with financially efficient mortgages (FEM's) and ensure they take every benefit to reduce the debt costs.
Latest opinions appear to be saying that we can expect another 12 months of this but that is still crystal ball gazing and in reality we do not believe anyone knows what will happen next.
Remember we still have good quality water, a great environment and summer is not that far off. Our lakes are filling nicely with water so power cuts seem remote. All in all NZ is a great place to live and I think the reserve bank will do its best as usual.
The above represents the opinion of IMS Financial Services, information and views are based on general news and bank issued newsletters from their various economists. We are mortgage brokers and not economists and you should not rely on our opinions when making financial decisions. Always seek expert advice unless of course you want to talk about mortgages and we can do that.
No-one is really expecting this to effect mortgage rates in the short term however DR. Bollar dfid indicate that further cuts may be sooner rather than later.
A lot will depend on the NZ Dollar movement, if it slips too far then this may negate further cuts. Time will tell.
Most of the central banks around the world have the same problem, inflation heading upwards and high interest rates. It will be interesting to see how the NZ strategy works.
Home values are still slipping and fuel prices remain high but we appear to have topped the peak on West Texas Crude but the $20 a barrel drop has not really een reflected fully at the petrol pumps. Most economists expect fuel prices to drop even further as speculation on oil appears to be waining.
Still not a good time to buy your residential investment property, the freezing or payouts from the Hanover group (One of larger finance companies in New Zealand)reflects the problem in the investment market as many developers find it harder and harder to attract buyers in what was traditionally the primary markets like Queenstown.
Home owners are not looking to sell at this time but are taking the rental market option, this is putting extra strain on the current landlords as more and more vacant property hits the market. This will result in lower rentals.
We still believe that you should avoid investment property sales consultants at this time and do your own thing, this will save you many thousands of dollars which can be spent on property improvements that will attract tenants who are an increasing property portfolio to select from.
Summary: - Current market in New Zealand is still recessive.
1. Falling house prices.
2. Finance companies still struggle to find investment capital.
3. Developers struggle to find buyers.
4. High mortgage interest rates.
5. High fuel prices.
6. Inflation trending towards 5%+
7. Labour market gathering momentum for wage increases to cover rising costs.
Home owners should look to refinance with financially efficient mortgages (FEM's) and ensure they take every benefit to reduce the debt costs.
Latest opinions appear to be saying that we can expect another 12 months of this but that is still crystal ball gazing and in reality we do not believe anyone knows what will happen next.
Remember we still have good quality water, a great environment and summer is not that far off. Our lakes are filling nicely with water so power cuts seem remote. All in all NZ is a great place to live and I think the reserve bank will do its best as usual.
The above represents the opinion of IMS Financial Services, information and views are based on general news and bank issued newsletters from their various economists. We are mortgage brokers and not economists and you should not rely on our opinions when making financial decisions. Always seek expert advice unless of course you want to talk about mortgages and we can do that.
Sunday, July 20, 2008
FEM mortgages become popular as times get hard
With many households struggling as a result of high interest rates, high fuel costs and rising inflation FEM mortgages are becoming even more popular.
FEM or Financial Efficient Mortgages offer some serious advantages over traditional mortgage porducts whilst retaining the traditional safety of a principal and interest loan (the ones you always pay off).
They still have the ability to have several fixed and floating rate options ensuring you can pick and choose the best rates that your crystal ball can provide.
The really effectiveness comes from the additional savings made as a result of the no cost or no fee structures. (unlike some offers these are not limited to a certain balance that has to be maintained either. They have no fixing fees, no bank fees, no statement fees, free direct debit and auto payment loading, all done through their 24 hour internet banking service. You get an eftpos card and can shop around for the best credit card offer with any bank you choose (If you really want a credit card).
No wonder they are so popular.
Simply mixing the bank and mortgage account uses the power of your unspent money (groceries, monthly bills even the mortgage money) to save interest until you spend the cash.
Gone are the old fashioned and dangerous revolving lines of credit, with the FEM loans all you can do is be better off.
Have you got a FEM loan?
If your mortgage pays off faster when you pay fortnightly - sorry but NO.
If you have a revolving line of credit - sorry but NO.
If you pay fixing fees, account fees or have to have a minumum debt balance for zero fees - sorry but NO.
If you have paid someone to arrange the loan for you? you may well have but you have also been ripped off.
I am happy to report that such mortgages have been around a number of years and have proven themselves as solid result generators with some borrowers cutting their mortgage repayment time in half.
The really magnificent thing about FEM mortgages is that you can build up savings in the good times and draw on them in the bad times, well at least for as long as you have a mortgage.
Want to know more about mortgage types - CLICK HERE
FEM or Financial Efficient Mortgages offer some serious advantages over traditional mortgage porducts whilst retaining the traditional safety of a principal and interest loan (the ones you always pay off).
They still have the ability to have several fixed and floating rate options ensuring you can pick and choose the best rates that your crystal ball can provide.
The really effectiveness comes from the additional savings made as a result of the no cost or no fee structures. (unlike some offers these are not limited to a certain balance that has to be maintained either. They have no fixing fees, no bank fees, no statement fees, free direct debit and auto payment loading, all done through their 24 hour internet banking service. You get an eftpos card and can shop around for the best credit card offer with any bank you choose (If you really want a credit card).
No wonder they are so popular.
Simply mixing the bank and mortgage account uses the power of your unspent money (groceries, monthly bills even the mortgage money) to save interest until you spend the cash.
Gone are the old fashioned and dangerous revolving lines of credit, with the FEM loans all you can do is be better off.
Have you got a FEM loan?
If your mortgage pays off faster when you pay fortnightly - sorry but NO.
If you have a revolving line of credit - sorry but NO.
If you pay fixing fees, account fees or have to have a minumum debt balance for zero fees - sorry but NO.
If you have paid someone to arrange the loan for you? you may well have but you have also been ripped off.
I am happy to report that such mortgages have been around a number of years and have proven themselves as solid result generators with some borrowers cutting their mortgage repayment time in half.
The really magnificent thing about FEM mortgages is that you can build up savings in the good times and draw on them in the bad times, well at least for as long as you have a mortgage.
Want to know more about mortgage types - CLICK HERE
Saturday, July 19, 2008
Avoid Rental Investment Property Consultants
This is not the time to get yourself involved with these companies. With the housing market experiencing falling prices you are simply going to put yourself behind for many years.
These companies will heap on charges and profit from the buy/sell and arrangement of services that in all honesty youcan do yourself.
Before you buy check out the real price of similar units on the Internet - you will save yourself thousands of dollars.
Use your own valuer never use a valuer appointment or recommended by investment property consultants, worse still never ever let them arrange a valuation for you.
You do not need to be an expert to do this yourself:
Look for a property in or around the city centre or local hospital, make sure it is 2or 3 bedroom, has parking, then redecorate the walls in neutral colours, fit a new kitchen (Granit or Marble tops, new appliances, modern light fittings, curtains, blinds and carpets. Tidy up the garden, put in a heat pump if missing and hey presto you have a property that will command good rental income.
Start by getting quotes for all of this work.
1. Get a free interview with a quality chartered accountancy firm and ask them if you need to form an LAQC, if the answer is yes get a quote from them to do the job.
Ask them for a price to complete and submit your IR23B claim form.
2. Order your own valuation and ask for a depreciation schedule at the same time. Remember you want a valuation as is and as renovated (as per your quotes)
3. Arrange your own property and landlords protection insurance - remember if it is part of a body corp then the body corp normally arranges the building insurance.
4. Get a free rental appraisal from a rental agency on an as renovations completed basis.
5. Use an independant broker or go to your own bank for the finance.
6. Get your own solicitor for the mortgage paperwork and get a quote or ask your mortgage broker/banker to recommend a good competitive solicitor.
7. If the vendor is a developer and it is a new unit then see if they will include 12 or 24 months rental guarantee.
Remember a consultancy firm will usually obtain a $20,000 discount from such vendors just to market them to suckers who use their services. The clients do not get the discount the consultants keep that. This is where your negotiating powers come into play, get the discount yourself, develpers always need to sell to move on to the next project.
These companies will heap on charges and profit from the buy/sell and arrangement of services that in all honesty youcan do yourself.
Before you buy check out the real price of similar units on the Internet - you will save yourself thousands of dollars.
Use your own valuer never use a valuer appointment or recommended by investment property consultants, worse still never ever let them arrange a valuation for you.
You do not need to be an expert to do this yourself:
Look for a property in or around the city centre or local hospital, make sure it is 2or 3 bedroom, has parking, then redecorate the walls in neutral colours, fit a new kitchen (Granit or Marble tops, new appliances, modern light fittings, curtains, blinds and carpets. Tidy up the garden, put in a heat pump if missing and hey presto you have a property that will command good rental income.
Start by getting quotes for all of this work.
1. Get a free interview with a quality chartered accountancy firm and ask them if you need to form an LAQC, if the answer is yes get a quote from them to do the job.
Ask them for a price to complete and submit your IR23B claim form.
2. Order your own valuation and ask for a depreciation schedule at the same time. Remember you want a valuation as is and as renovated (as per your quotes)
3. Arrange your own property and landlords protection insurance - remember if it is part of a body corp then the body corp normally arranges the building insurance.
4. Get a free rental appraisal from a rental agency on an as renovations completed basis.
5. Use an independant broker or go to your own bank for the finance.
6. Get your own solicitor for the mortgage paperwork and get a quote or ask your mortgage broker/banker to recommend a good competitive solicitor.
7. If the vendor is a developer and it is a new unit then see if they will include 12 or 24 months rental guarantee.
Remember a consultancy firm will usually obtain a $20,000 discount from such vendors just to market them to suckers who use their services. The clients do not get the discount the consultants keep that. This is where your negotiating powers come into play, get the discount yourself, develpers always need to sell to move on to the next project.
Our Current Recommended Survival Strategy
1. Identify all high cost short term debt and consolidate into your mortgage account up to 90% loan to current value.
2. Obtain a financial efficient mortgage (FEM) (Bank account and mortgage account is the same with zero bank fees - including zero fixing fees)
3. Run all income through the mortgage account to save interest until you spend the money.
4. If your saving plan does not return a greater net percentage (after tax and fees) than the cost of the mortgage put your savings into your mortgage.
5. Use short term fixed rates to get rate advantage but mix them and identify the right amounts to fix for each period. (have a mortgage analysis undertaken)
6. Keep your eye on the fixed rate movements this will give you an idea on how the banks expect the rates to perform over the next 5 years.
7. Do not be tempted to hit the credit cards and buy on HP, with tough times the retail offers can be hard to resist.
In a recessive market what you owe is far more important than what you own.
2. Obtain a financial efficient mortgage (FEM) (Bank account and mortgage account is the same with zero bank fees - including zero fixing fees)
3. Run all income through the mortgage account to save interest until you spend the money.
4. If your saving plan does not return a greater net percentage (after tax and fees) than the cost of the mortgage put your savings into your mortgage.
5. Use short term fixed rates to get rate advantage but mix them and identify the right amounts to fix for each period. (have a mortgage analysis undertaken)
6. Keep your eye on the fixed rate movements this will give you an idea on how the banks expect the rates to perform over the next 5 years.
7. Do not be tempted to hit the credit cards and buy on HP, with tough times the retail offers can be hard to resist.
In a recessive market what you owe is far more important than what you own.
Our NZ Residential Property Market Opinion
IMS strongly believes that it is NOT currently the time to buy property, even residential investment property should be avoided as more and more rental properties arrive on the market. Those not able to sell are keep hold and placing their properties For Let. Those who continue to look for investment property should ensure they avoid specialist companies offering full packages. Such companies are renown for hiking prices to get a good profit margin and in a recessive property market these can produce a serious disadvantage for the property buyer.
IMS advises client to retain property if possible and weather the storm, refinancing and debt consolidation is the key to an asset building strategy using financial efficient mortgage products, zero bank fees and delayed payment via credit card usage. Where possible avoid revolving credit, the best mortgage products offer all the same advantages but within a safe principal and interest loan.
IMS advises client to retain property if possible and weather the storm, refinancing and debt consolidation is the key to an asset building strategy using financial efficient mortgage products, zero bank fees and delayed payment via credit card usage. Where possible avoid revolving credit, the best mortgage products offer all the same advantages but within a safe principal and interest loan.
Subscribe to:
Posts (Atom)
