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Posted Date

30 May 2021

Reliance Newsletter May 2021                                 

Current discounted Interest Rates* as on 28 May 2021:

Variable                        3.49%
6 Month Fixed               2.75%
1 Year Fixed                  2.19%

18 months                    2.39%

2 Year Fixed                 2.49%
3 Year Fixed                 2.69%

4 Years Fixed                2.99%
5 Year Fixed                 3.09%

These are not published rates of any bank. But for good sized lending of over one million dollars and low Loan to Value Ratio (LVR), Reliance Financial Group may get* these rates or even better depending on loan size.  *Conditions apply.


New Zealand’s Economic Outlook  

The Reserve Bank has kept the official cash rate at its record low of 0.25%. While economic growth in New Zealand slowed over the summer months following an earlier strong rebound, construction activity remains robust. The government claims that it has slowed the house price growth through the changes it is making since March, primarily against property investors. The removal of interest deductibility on existing residential properties is expected to have the largest impact on the housing market.  The overall result is that  the house prices will continue to rise though at a slower speed. Annual house price growth is forecast to reach a peak of 17.3% in the June 2021 quarter before start slowing.


House prices where to? – ASB Survey

Expectations that house prices will keep rising remain high, despite Government policy changes and a slowing market, a new ASB survey shows.

A net 64 per cent of respondents to the ASB survey, which covers three months ending April, expected house prices to keep climbing during next year.

The result came after the Government’s announced housing policy changes in March, which were intended to slow down the runaway market. The results are further evidence that housing market pressure was being released only gradually. It was notable that housing confidence remained at such high levels even after introduction of government’s new policy of tax changes for investors in March.

Two months have passed since the Government announced measures aimed at dampening the rampant growth of the property market, and yet the latest QV House Price Index data shows the market hit a new high in April. The average value increased 8.9% nationally over the past three-month period, up from the 7.8% quarterly growth we saw in March.

The average value in the Auckland region is $1,306,913, up 8.2% over the last quarter, with annual growth of 19%, up from March’s year-on-year growth of 16.1%.

Analyst sees the most significant measure being the removal of interest deductibility. The new policy stops investors from offsetting mortgage interest against tax. This applies to new investors immediately and will be phased over the next four years for existing landlords. New builds will be exempt from this tax change, however. What will be considered a new build, a comprehensive definition is yet to be decided. For instance, how will you treat   two  newly built dwellings  by removing an old house.? There can be more such scenarios. IRD/treasury are yet to come out with an explanation of all such situations.

But new tax changes from March have definitely compelled buyers to think twice before deciding what to do. Some buyers have adopted a ‘wait and see’ approach, which has resulted in less attendance at open homes and auctions. Auction success rates have reduced considerably.  This could potentially indicate that the balance between vendor and purchaser expectations may be switching slightly. Overall, we expect to see the market stabilise further as we head into winter.

You may like it - Central Banks Interest rates

Central bank interest rates in Switzerland:  -0.75%, Denmark -0.35%, Japan -0.1%,

Sweden, Norway and the Eurozone (Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain):  all at 0%,

 Australia, Great Britain, Israel and Poland: all at 0.1%, and

 Canada, Czech Republic, New Zealand and the United States: all at 0.25%.

Fixing home loans under rising rate scenario

The RBNZ has mentioned in its latest monetary policy statement that Official cash rate (OCR) will rise from mid-2022.   While short-term interest rates up to two years are more influenced by OCR, longer term rates are determined by international markets.

Current rates are probably the lowest historically and fixing on short terms has saved a lot in interest for borrowers during past few years.  Till now, short term rates were best option.  It could be the right time now to lock in longer-term rates before mortgage rates start rising.

It is advisable to spread your loan over short terms of one & two years and longer term of say  3 to 5 years. Fixing for one to two years saves you in interest cost and fixing for long term of three or more years gives you rate certainty and guaranteed fixed repayments for longer time.

Contact us for a no obligation chat. We can advise you as what should be a good loan structure for you based on your personal financial situation and goals. We know what best interest rates are available with different banks which are invariably far better than what they advertise. We get the best for our clients and structure their loan which help them in getting debt free faster.  We can do it for you at no cost and save you lot of money.


Buying home through Turnkey package

Buying off a plan

It is also known as turnkey project. It means paying say 10% deposit upfront to secure the property. The remainder of the money is due on completion of the build. Developers who are planning to build apartments or a town house complex will often sell the units off the plan before the construction has started. You can see images or sometimes visit a show home to get an idea of what you will be buying.

There are some benefits to buying off a plan. You are signing up for a new home that should meet all the latest building specifications, and you are buying something at a set price with an initially low outlay (the deposit). A long settlement period gives you time to save money for the final payment. If the market is buoyant, the property may also increase in value over this period, so you will get more than what you paid for.

However, there are some risks and some precautions that you should take.

·         Find out developer’s reputation and track record.  Do some due diligence as you are entirely reliant on the developer and construction firm. Take a look their previous developments they have been involved in.

·         Check all the details to make sure the finished property will meet your expectations. Ask questions about the drawings or show home. What size were the beds in the promotional shots? Is the building to minimum standards or is the specification above and beyond? Check security and safety features. Ask for detail about the common areas.

·         The build may take longer than expected which may mean you are paying rent for longer than you had budgeted for.  

·         The interest rates may go up or lending criteria may change. So always get bank’s approval before signing the contract.

·         If the completed complex will have a body corporate, find out how this will be managed and the costs you will need to budget for.

·         Some contracts allow buyers to choose the floor plan or the fixtures and fittings. Others may allow the developer to change the layout without checking with you first. It is important to understand every aspect of the property.

·         It is important to engage a lawyer to help you understand all the details of the contract. Check to see if there is a ‘sunset clause’ that specifies what will happen if the development is not finished on time. You should also ask what will happen if the developer goes into liquidation and the project is sold to another company.


While applying for your Life & health Insurance

What is important while applying for personal risk insurance like life and health insurance?

When you apply for personal risk insurance like life, trauma, or health insurance the application form has a lot of questions about your health. You must answer these questions completely and truthfully as the insurance company will rely on the information in the application, to decide on the terms and conditions for your insurance.  Further factors affecting the premium will include, age, gender, smoking habits, current and past health, occupation, height to weight ratios and sometimes family health history.

 If you do not reply questions in the application completely and honestly, the insurer is entitled to refuse a claim on the grounds of ‘non-disclosure’, with or without a return of your premiums. Therefore, to ensure that your answers are complete and correct, a good idea is to keep a copy of your GP's notes handy while completing the application.  You are entitled to a copy of your Doctors records and mostly free of cost.

Many people fail to disclose their pre-existing medical conditions. Some   do inadvertently and some knowingly because either they have forgotten about past medical history or they feel it is not important. Sometimes, people want to hide pre-existing medical conditions with the assumption that they will be covered for these which is not correct. At the time of any claim, the insurer will ask your doctor for your medical history and is entitled to refuse a claim on the grounds of ‘non-disclosure.

A Financial Adviser can advise you on an appropriate insurance cover for you and help in completing the application form correctly and help you at the time of any claim. Talk to us and we will look after all your insurance needs and arrange all insurance that suites your needs and at right premiums.