News - 2 March 2009

The Alpha Update

Selling Property? Will the Bank Release their Mortgage??

I've had several instances recently where a client has sold a property to reduce debt. However, they have still had loans with the bank, secured over different property. When it comes settlement day, the bank wants more than the sale price in reduction of debt!! How can this be??

The bank has calculated their security position and loan to value ratios according to current lending policy, which in most cases has tightened substantially in the last 6 months. So two properties with 90% loans on them are now way outside current credit policy. If one is sold, the bank is likely to want debt on the remaining property reduced back to 80% of the value, and may even request an updated valuation. In one recent instance, a property was sold for $500k, but the bank wanted $600k back to release their mortgage!

What to do? When pushed hard enough, lenders will assess each case on it's on merits. Usually there is a compromise position that can be reached. But if you are selling a property, FIND OUT EARLY how much the bank requires to release its security. Otherwise a purchaser could sue for non performance of an unconditional sales contract!

Who do you know who is in a pickle after selling a property? Get them to Call Us Today on 021 676 747 or 0800 676 747 for help in finding a solution to their problem.

Food for Thought

Failure is only a temporary change in direction to set you straight for your next success - anon

What's New??

• Pricing for risk returns - interest rate margins are added for loans over 80%
• ASB launches 5% money for job growth or job preservation projects (but beware of the fine print!)

If you or anyone you know wants to know more about any of these products, email Stuart@alphagroup.co.nz

Interest Rate and Currency Comments

Kiwibank and Westpac have taken a view on the direction of the next OCR review (due 12 March) and reduced floating rates by 0.5%. However longer term rates have crept up, with 4 and 5 year rates above 6% now. Be wary of taking the lowest rate on offer - it may be better to pay a small percentage more to get a 3 year rate which gives more certainty for longer.

The dire problems associated with the US and UK markets in particular are focussing the world's attention. Because of this, the Kiwi and Aussie are under the radar and so the kiwi remains anchored around 50 US cents and 80 Australian cents at present, swinging up or down by 2-3 cents, but not breaking out of this pattern.

(See below for latest interest and exchange rates).

The Finance Markets

As of 8am on Monday 2 March 2009 the following Interest Rates applied:
Official cash rate 3.50% (stable)
90 day bill rate 3.20% (down)
5 year swap rate 4.08% (up slightly)
NZ/US Dollar 0.4987 (down)

Current Range of Interest Rates for home and investment mortgages as at 2 March 2009

Floating:
5.99% to 9.49% (down slightly)

Fixed For:
1 Year - 5.69% to 6.85% (stable)
2 Year - 5.88% to 6.99% (stable)
3 Year - 5.95% to 6.99% (stable)
4 Year - 6.30% to 7.05% (up slightly)
5 Year - 6.40% to 6.99% (up slightly)

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.