We’re on the final downhill to the end of the year! What a year it has been. Changes to the CCCFA, changes to Bank policies, changes to our business systems, changes in our team, a massively hot property market, highest house prices on record… wow. It’s been a big one. Throw in a bit of Covid, and it’s certainly been quite a ride.
We are pleased to see New Zealand heading into the new “traffic light” system approach to Covid. This should offer more stability to businesses, with less likelihood of snap lockdowns which are so hard on everyone. Many businesses have suffered, over 27,000 businesses have closed in the last few months. There are some good news stories where some businesses and industries that have thrived… and on we go!
We are working through our systems and will be sending Terms of Engagement documents for you all to sign. These are about clarifying our services and how we are paid along with what you can expect from us. We still get paid by the providers and there are no fees unless we declare them as part of the process. We will however charge a fee if we complete applications and then you choose to use a different a different adviser or go direct to the bank.
Changes to the default schemes come into play on 1 December, including reduction in fees. As the share markets have been adjusting with the increase in interest rates and inflation many portfolios have adjusted.
Many of the KiwiSaver funds have been taking a greater interest in the ethical and socially responsible investing. If this is important to you, you can check out the Mindful Money website to see how ethically your funds are invested.
The OCR has been upped by 0.25%, now sitting at 0.75%. This is in line with what the RBNZ indicated, so no surprises there. We are likely to see increases at each announcement for the next year or so, with the indications being that the OCR is likely to be up at 2% by the end of next year.
As we mentioned last time, the acceleration is an attempt by the RBNZ to combat the effects of inflation. If your situation allows you to lock in some good rates before they go up again, talk to us about your options. By being proactive now you could save yourself quite a few dollars on loan repayments.
Interest rates have gone up more than 7 times since August and we are expecting the rates to continuing rising as part of the strategies of the RBNZ and the banks to manage the inflation increases.
Banks and Finance
This year we have seen many changes to the banks’ rules.
Loan to Value Ratios – we started the year with opportunities to borrow up to 80% of the property value for investment property with all lenders, and this has now dropped to 60% with the main banks as per the RBNZ rules. A year ago, Home Owners could easily borrow up to 95%. As the banks are now required to meet the increased capital requirements, they have reduced the level of lending over 80% and will only look at existing clients for over 90% lending, however there are no guarantees.
The CCCFA changes have come in and unless you can show evidence of the expenses or incomes and meet the new stricter loan servicing rules you could have difficulty getting lending from the banks.
Credit assessors at the banks seem to be struggling with the new rules, and applications that would have easily been accepted less than 3 months earlier are being declined, even when the application would have been beneficial for the client. The CCCFA rules are black and white and common sense no longer prevails. The fines for the lenders and advisers are too high if the loan then leads the client to end up in hardship, so banks are very cautious about granting lending.
This is causing lots of problems for clients who need lending, the “responsible lending” rules create a bit of a catch 22! You have to be in a good financial position to get a loan, but you need the loan to get yourself into a good position. Tricky times. As always, we are here to help you see ways of managing your situation, no matter how complicated it seems to you. Get in touch.
Comparatively affordable house prices in Christchurch have led to many out-of-town buyers snapping up “bargains” which is pushing up the housing prices in Christchurch, with average house sales in the late $600k range. Stuff have published an article about it here.
We are working with a number of clients who are wanting to buy first homes in Christchurch, and all we can say is … get those ducks in a line! Plan, be prepared, ask us what you need to do to be in the best position possible.
An update from us.
Winding up a big year! We will be taking a break over Christmas from the 23rd December, but Elise will still be available for urgent matters. We will be back in the office, refreshed and rearing to go, on the 5th January 2022.
We will do a mini update before we close for December.
We look forward to hearing from you if there is anything we can help you with and do keep an eye on our Facebook and blog for useful information and tips.
Until next time,
Elise and the Team