Heading into March!
We’re well into 2022 now, and most of us have stopped writing 2021 on things… does it feel to you like this year is flying by?
In this newsletter we are going to talk about:
What’s up with us
Summary of February blogs
Property
KiwiSaver
Banks
Reserve bank
Hot tip of the month
First Home Buyer Tips
Did you know…
The year is racing ahead and recent changes have affected the banks willingness to lend money. This is bringing in more competition with the banks looking to buy business to retain market share. Interest rates and inflation are on the rise, with many of the banks moving the interest rates up in anticipation of the OCR review on 23 February ’22.
Omicron is here for real and this is beginning to impact many businesses. At BOB we have our plans in place and can continue to support you remotely if needed, so please do not hesitate to reach out. When working with you in person we are taking necessary precautions.
Kerryn has joined the BOB team as Client services support. Kerryn is an Accountant who has her own customer base, and is working with us as part of transitioning to working full time in her own accountancy firm. So, we are very lucky to have Kerryn on board supporting us.
Kerryn and Elise are working on the full FAP application and other cool systems which are speeding up the application process, so you may be seeing some changes coming through in the way we operate to ensure we are meeting our FAP obligations and this includes using our updated Terms of Engagement.
We have posted a few blogs in February, do go and have a read. Also, we have added a Sign-up link at the bottom of each post so that you can receive an emailed notification when we post a new blog. Cool!
Buying a house shouldn’t be this hard!
A First Home Grant is all well and good, but not much use if you can’t get a mortgage to buy your first home.
Should I pay off my debt or should I be saving?
The answer depends on your situation. Ideally you pay off debt, and you save! This is the classic case of having your cake and eating it.
Hot tip of the month
Avoid going into overdraft!
An overdraft or credit card limit is NOT a guideline. If you are looking to borrow money and you have gone over the limit on your credit card or withdrawn more than the limit of your Overdraft the bank will call this “Bad Account Conduct” and it will be an almost automatic decline on any loan applications until you are able to show 3 months of good account behaviour, the same goes with paying your power and telco bills. Making your payments on time is key. If you’ve got into this situation and the banks are frowning at you, all is not lost. We do have access to some lenders that are a little more lenient but sometimes this comes at a price!
Did you know?
An Overdraft explained. An overdraft is a facility offered by banks when you need funds temporarily and you don’t want or need a credit card. It is an everyday type of bank account and if you have money in your account then the account is “in the black”. You typically don’t earn interest on this money. If you withdraw more than you have (use the credit facility) then you are operating “in the red” and you will be paying between 12-22% interest on the credit funds. You will pay a monthly fee for the facility and if you go over the limit you will pay a fee for being overdrawn. Talk to us about ways to operate without the overdraft.

First Home Buyer Tips
Buying your first home can be an overwhelming process. This is our new tips section to help you get into your own home.
Checking out a property. When you find the property that you want to buy there are a long list of things to check, but these are the key.
Building condition – Building inspection – check for maintenance and weather tightness
Insurance – can you get insurance of the property
Title and easement checks – Are their things on the title that will affect you using the property
Valuation – depending on the lender and the level of debt you may need a valuation
LIM (Land Information Memorandum) and PIM (Property Information Memorandum) reports to
You will need funds for doing these checks as part of your due diligence and First Home Buyers cannot use their KiwiSaver for these costs.
Have a read of the First Home Buyer section on our website too.
KiwiSaver
You are now 3 months away from receiving your Government Contribution. Make sure you have put enough into your KiwiSaver to receive the full free allocation of $521.43 – please do not hesitate to contact us if you would like some help accessing your KiwiSaver account.
Banks
The banks are working with the regulations, and the number of applications that they are approving is down from previous years for the same period. Part of the reduced number of applications is because as Advisers we are working with our clients and often not bothering to submit applications that we can see are not going to work under the Banks’ current policies.
We are working with our clients to set their finances up so that they do work, and working with Lenders that are taking a responsible common sense approach to the application of the rules. Many of the credit assessors are feeling the same frustration we are feeling.
Most banks have withdrawn approvals for loans over 80% …and then ANZ announced a policy change on the 22 Feb to say they are open to applications for loans over 80% with one small criteria to meet: UMI (Uncommitted Monthly Income) of over $2,500 per month. So, this product is only available to people who earn mega bucks and/or have no debt. Some say that ANZ have set the bar high to avoid being flooded with applications, but really!! Why not position for the workload and set it at something more reasonable? We know they are only allowed a certain percentage of their lending at this high rate.
Reserve Bank
The OCR increased to 1% on 23 Feb 2022, up 0.25%. The banks were anticipating that the increase could have been 0.5% and so had already set their rates to accommodate for the intended rate increase. What does this mean for you? Interest rates are going to continue to go up and the next OCR review is scheduled for 13 April. The banks seem to be moving independently of the OCR to a large degree – putting their rates up when they expect the Reserve Banks increase the rate.
The OCR is expected to be around 3.4% by 2024 which is 1% higher than they were anticipating, and this will mean that the 1 yr rate is likely to be between 6-6.5%. The Reserve Bank are also putting other limitations in place such as LVR limits, and are considering Debt to Income ratios, which many of the banks are already using regardless.
Property
A number of things are happening in the property market. In the last year or two auctions have been the preferred method of selling. We are seeing a shift now. Auctions are becoming less common as there have been many where there is only one person bidding, which is defeating the value add of an auction. As it has become harder to secure lending there are now fewer people in the market, the most notable drop being new home buyers. People are completing their tax returns and finding themselves with a tax bill. We are seeing investors moving to put their properties on the market as they will not be able to afford the property as the tax benefits of the interest deduction continues to decrease.
Commentary from the likes of CoreLogic is that we are moving into a “buyers market”, which means that the sales volumes are steady or beginning to fall. Values are holding at the present time, with the expectation that we will see some drop in value in the coming months.
Well that’s enough for this month! Looking forward to hearing from you, we are always available for a chat about your situation. Book a meeting at the Calendly link, or send us an email.
Until next time,
Elise and the Team