News - 15 AUGUST 2005

Interest Rate and Currency Comments

Very few changes in interest rates over the past fortnight, although there were a number of small increases in longer term rates (3-5 years) on Friday. This was caused by similar rises in the US, where long term rates have been very volatile. Look for limited change in short term rates, and a gradual increase in longer rates over the next month or two.

Increasing oil prices continue to hammer the US dollar, meaning the kiwi has gained around 2 cents over the past fortnight. Forecasts suggest that a range of 68-71 cents should remain for the rest of this year (time will tell!).

(See below for latest interest and exchange rates).

Food for Thought

Fear is nothing but an illusion. When you share it with someone else, it tends to disappear.

Problem Profile

Many investors are keen to buy properties in need of some renovation, do the property up, and then revalue the property to leverage the equity that they have just created. One of the major issues with this strategy is that lenders (both banks and non-banks) want to have a time delay between the initial purchase and the first revaluation after renovations.

How long is this delay? Well, the answer is – it depends! The general rule is at least 3 months (and most like to wait 6 months), however there are some ways to shorten up this delay period.

Factors taken into account by lenders include:

• The unconditional date on the purchase contract (not necessarily settlement date).
• The amount of renovation work completed (by scale and by value).
• Any changes (increases) in the actual rent obtained or rental appraisal as a result of the renovations.
• How the new valuation compares with original purchase price and the original valuation (if one was done).

This is a grey area where a specialist mortgage broker can help achieve your goals more quickly by understanding how different lenders view this situation.

Who do you know that is looking to release equity created by renovations to investment property????? Get them to call Stuart Duncan at Alpha Financial Solutions Ltd and Acumen Mortgages on 0800 676 747 to find out more. We Can Help!

The Finance Markets

As of 8am on Monday 15 August 2005 the following Interest Rates applied:
Official cash rate 6.75% (stable)
90 day bill rate 7.03% (up slightly from 7.02%)
5 year bond rate 5.83% (up slightly from 5.73%)
NZ/US Dollar 0.7057 (up from 0.6836)

Current Range of Interest Rates for home and investment mortgages as at 15 August 2005.

Floating:
7.85% to 9.50% (stable)

Fixed For:
1 Year - 7.60% to 8.40% (stable)
2 Year - 7.40% to 8.25% (stable)
3 Year - 7.40% to 8.40% (stable)
4 Year - 7.45% to 8.11% (stable)
5 Year - 7.40% to 8.09% (stable)

For a complete table of interest and exchange rates, click here.

The information stated herein was correct at the time of release, but is subject to changes without notice.