News - 10 October 2005

Interest Rate and Currency Comments

Interest rates have been climbing over the past 2 weeks across the board. The prospect of an increase in the Official Cash Rate has grown significantly and lenders have passed this on already in short term rate increases. US rates are also increasing and this has influenced the longer term fixed rates.

Call me now if you have a fixed rate maturing before Christmas. There is still time to secure a reasonable interest rate for you!

Given previous comments, the kiwi will remain supported as long as our interest rates remain high. This will lessen the impact of oil price rises, but could encourage us as a nation to keep spending beyond our means.

(See below for latest interest and exchange rates).

Food for Thought

People prefer to follow those who help them, not those who intimidate them. - C. Gene Wilkes

Problem Profile

Construction Loans

I've had several clients building properties recently, either for themselves or as investment properties. Construction loans are a great tool, however they have some extra complexity that you need to be aware of.

A lender will always look at the cost of the land, the cost of construction, and the end value of the project. Typically, they will look for a fixed price construction contract, so the development cost is known and fixed. Once approved, they will advance funds against the value of the land (up to 80% typically), and then on a "cost to complete" basis. This means that, regardless of the value of the work in place, they will retain sufficient funds at all times to complete the building in terms of the original fixed price contract. Progress valuations will be required at key milestones (eg: enclosed stage), as an update.

To work through this complexity with the minimum of fuss, call Stuart Duncan at Alpha Financial Solutions Ltd on 0800 676 747 NOW!!

The Finance Markets

As of 8am on Monday 10 October 2005 the following Interest Rates applied:
Official cash rate 6.75% (stable)
90 day bill rate 7.22% (up)
5 year bond rate 5.95% (up from 5.75%)
NZ/US Dollar 0.6979 (up from 0.6932)

Current Range of Interest Rates for home and investment mortgages as at 10 October 2005.

Floating:
7.99% to 9.50% (stable)

Fixed For:
1 Year - 7.60% to 8.47% (up)
2 Year - 7.60% to 8.30% (up slightly)
3 Year - 7.40% to 8.55% (stable)
4 Year - 7.45% to 8.05% (up)
5 Year - 7.30% to 8.00% (up)

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.