News - 26 June 2006

Problem Profile

What happens if the Bank wont lend to you???

Over the past 3 years or so, Banks have become increasingly willing to lend money on all types of property and to all types of borrowers. Even 5 years ago, it was unheard of for a bank to be offering 100% finance, lo-doc loans, or loans to people with any form of adverse credit. Now all of these products are mainstream, with a variety of lenders to choose from.

YOU HAVE A FANTASTIC OPPORTUNITY RIGHT NOW, BUT IT WONT LAST!! WHAT AND WHY??

Right now, banks have come off 3 very buoyant years, with increasing volumes of loans being written. However, loan volumes have slowed recently. The banks still have staff and other overheads to cover, and have not started downsizing, so they must compete harder for a smaller pool of loans to cover their overheads. Also, loan losses are still very low, so their credit policies have not yet tightened. Thus, they will negotiate very hard on pricing, and will lend on most reasonable loan requests.

When loan losses start rising, and Banks begin to reduce staff and overhead costs, they will become much more selective about their borrowers, and much less keen to discount pricing. So "BE PREPARED" now for tougher lending ahead..

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Food for Thought

One has to remember that every failure can be a stepping-stone to something better. Colonel Sanders

Interest Rate and Currency Comments

Uncertainty reigns supreme at present. The Reserve Bank is likely to hold the Cash Rate at 7.25% for the rest of the year, meaning no chance of a fall in floating rates. However there is slight speculation that rates could in fact rise if inflation continues to climb. US rates are certainly climbing, and this will flow on to our longer rates in the weeks to come. Expect stability or gradual increases between now and Christmas.

The kiwi returned to its downward trend last week, as our interest rates became less attractive than US rates. Until we start (as a country) living within our means, the currency will remain under pressure.

(See below for latest interest and exchange rates).

The Finance Markets

As of 8am on Monday 26 June 2006 the following Interest Rates applied:
Official cash rate 7.25% (stable)
90 day bill rate 7.47% (stable)
5 year bond rate 6.03% (up slightly)
NZ/US Dollar 0.6095 (down from 0.6259)

Current Range of Interest Rates for home and investment mortgages as at 26 June 2006.

Floating:
8.60 to 9.95% (stable)

Fixed For:
1 Year - 7.85% to 8.85% (stable)
2 Year - 7.75% to 8.95% (up slightly)
3 Year - 7.65% to 8.85% (up)
4 Year - 7.79% to 8.23% (stable)
5 Year - 7.65% to 8.30% (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.