New Zealand Interest Rate changes
Filed under: Banks, Economics, Interest Rates, Credit Cards & Mortgages in NZ
The reserve bank has held our base interest rate – and now it seems most of the “experts” how claimed the rate would be rising by the end of this year have changed their minds and now claim it will be march next year.
Apparently they will have to go but then some say they shouldn’t. Some say they should stay the same.
Helpful.
Interesting, I checked the ASB home loan interest rates – and they have gone down recently:
As at 01:33:46 a.m., Thursday 4 August 2011
- Housing Variable 5.75 % p.a.
- Housing Fixed (6 Month) 5.85 % p.a.
- Housing Fixed (12 Month) 6.15 % p.a.
- Housing Fixed (18 Month) 6.40 % p.a.
- Housing Fixed (24 Month) 6.65 % p.a.
- Housing Fixed (36 Month) 6.95 % p.a.
- Housing Fixed (48 Month) 7.35 % p.a.
- Housing Fixed (60 Month) 7.75 % p.a.
- ORBIT Home Loan 5.75 % p.a.
As at 12:25:54 p.m., Thursday 15 September 2011
- Housing Variable 5.75 % p.a.
- Housing Fixed (6 Month) 5.85 % p.a.
- Housing Fixed (12 Month) 5.90 % p.a.
- Housing Fixed (18 Month) 6.10 % p.a.
- Housing Fixed (24 Month) 6.30 % p.a.
- Housing Fixed (36 Month) 6.70 % p.a.
- Housing Fixed (48 Month) 7.05 % p.a.
- Housing Fixed (60 Month) 7.40 % p.a.
- ORBIT Home Loan 5.75 % p.a.
I’m still not fixing from my flexible rates.
Over 1,320 jobs paying over $100,000 in New Zealand
Back in May 2009 (jeeze I’ve been blogging too long!) I posted about the fact that there were 735 jobs listed on Trade Me with salaries quoted over $100,000. That number has nearly doubled.
Now there’s actually 10,355 jobs currently listed on TM, which means that the proportion of high paying jobs is actually down ever so slightly from 14% to 12.7%. But IT and then Engineering are still the most likely jobs to get you the bigger bucks. The proportion of High Paid IT jobs in Wellington is also down slightly – at 36% of the total IT market.
And it should be remembered that just because a company in New Zealand lists a job as paying over $100,000 it does not mean that this is the salary they will end up wanting to pay you. So just be wary.
Why exactly should interest rates have to go up?
I just do not get this. There was a piece on the news last night about the large and rapid increase in the cost of living over the past year. This means inflation goes up (which just tracks how much prices have risen). Which means that interest rates should go up. Because that will apparently curb our spending and bring the rate of inflation down.
Except that the costs that are going up are food, power and petrol, as well as the luxuries. (A flat white will often now cost $4.50 whereas you used to be able to get one for $3.50 or even $3 even a year ago.)
Petrol went up by 20 per cent, food by 7 per cent and electricity by 7.8 per cent as the consumer price index rose 5.3 per cent in the year to June 30, the biggest rise since 1990.
The figure includes last year’s rise in GST but, even without it, inflation would still have been 3.3 per cent, above the Reserve Bank’s 1 per cent to 3 per cent target.
Now economists believe there is a 70 per cent chance of a rise in mortgage rates before December to try to curb inflation.
So why would you increase interest rates, putting up the cost of the mortgage, in order to give people even less money to put petrol in the car to get to work and earn the money they need to pay for the mortgage?
Why would you give them less money to put food on the table?
Why would you give them less money to heat their homes?
Because news reports are also saying that money is not being spent in retail stores. In fact an article in the Dom Post this morning actually bemoans that even the Kirkaldie and Staines winter sale is a bit of a damp squib – as opposed to the usual “queuing round the block” grand event.
And of course all of this goes hand in hand with little or no pay rises for the majority of people.
I can only hope that someone at the Reserve Bank of NZ can tell the somewhat obvious difference between inflation caused by people racking up credit to buy stuff they don’t need, and inflation caused by the basics rocketing up in price. It seems a bit obvious to me, but then I am not an economist.
Are house prices in New Zealand really too high?
Filed under: Cost of living, Economics, General Budgeting, Interest Rates, Credit Cards & Mortgages in NZ
Or are people just wanting a Rolls Royce on a Mini Cooper budget?
Auckland first-home buyers Chelsea and David Yandell ended up paying more for their Onehunga place than they initially expected when they started out as house-hunters.
Now, they have a three-decade mortgage. “We realised that paying $350,000 in Auckland, you’d get something that was pretty crappy,” recalls Chelsea of the buying experience. So they changed their expectations and borrowed more.
“The house we bought has been finished to a high standard. It’s perfect. When we were looking, we realised we’d have to spend more. We had a look around for a few months and we had our hearts set on a couple of houses. But the places we were looking at would not have gone up in value. It wasn’t what we wanted.
“House prices are definitely too high and wages are too low for first-home buyers. We’ll be 55 by the time we pay off the 30-year mortgage. But we didn’t want to keep renting. That’s dead money. … We are now more careful with our money and set goals. If we pay a certain amount off the mortgage, we can get new blinds. We’re with KiwiSaver so we know in retirement, we will have something more than the house.”
Sorry – but there is absolutley sod all in this article that suggests that house prices are too high. Now they may in fact be too high – but not because you want a house that’s finished to a high standard. That’s just you wanting a better house than you can afford. What annoys me about this is the amount of times we get blamed for this because we are property investors, and thus automatically we are greedy. But surely the greed is in wanting something you cannot afford?
It is not the fault of high prices that these people have a 30 year mortgage – it’s that the houses they were prepared to buy could only be theirs if they took on more debt than they could manage in less than that time. That is entirely down to them, and thus their own fault.
My first house cost £84,000. I imagine that these two would have turned thier noses up at it instantly. It was old (1700′s – and 1960′s) tiny (two beds) a crappy kitchen, a coal fired stove as the only heating and it didnt work properly, and had the most disgusting wall coverings you have seen in your life, and carpets that wouldn’t have looked out of place in a crap pub. And an avocado bathroom suite! Almost all our furniture was handed down to us from other family.
But it was a great home – and when we got it done up it was a lot better than when we started. It was ours, and we could afford the mortgage on it. Im sure we could have borrowed more and got a “nicer” house – and then bleated about how much that perfect house was and how awful it was that we had to pay so much for it. And when I was going through a divorce, I could still afford the mortgage on it becuase I had not been greedy and bought a house that we could not afford becuase I wanted something “perfect” for my first home at the age of 25!
Doing that means that at the age of 35(ish) when we came to NZ we COULD afford the nice house in the country, with stunning views and a swimming pool. I would love to have had this at their age – I just wasn’t that daft – and I sure as hell didnt expect house prices to stay low just so I wouldnt have to bother climbing the property ladder.
I also always wonder what these people will do when they come to sell? Because at the end of the day, house prices are actually determined by two things: what the buyer will pay, and what the seller will accept. Human nature dictates that we complain that prices are too high when we are trying to buy – but refuse to accept “insulting” offers when we sell. We become the problem we just complained about.
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How discounting works?
From my new favorite Webcomic Abstruse Goose (with thanks to Peter B).
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Can the Exchange rate actually get any worse?
Filed under: Economics, General Budgeting, Getting to New Zealand
Having lunch with mum the other day, she told me that she had been checking the exchange rate, looking to bring a bit more money over, and seen that it have actually gone below $2 to the £!
She was right. On the third of January this year, the interbank rate was a sickening $1.986 for every £1.
I actually had a look back to see when it last went that low, but unfortunately first I came across what it was like before it went into freefall.
In fact I had to go back to the earliest date allowed on the charts at HifX, and even going back as far as 1998, the rate for people moving money this was has never been so bad.
On the plus side (I guess) this is an absolutely great time for anyone with $NZ sitting around with nothing to do. You can convert it to £ or $US and wait for the cycle to come round again. Now there are people who claim that this might not happen – that actually $2:£1 might be the new “normal”, but always before these things have worked as a cycle. Oddly you get the same argument with house prices – we shouldn’t this time be expecting house prices to rise again, and we should all get used to lower house values. I’ve noticed these are generally the same people who poured scorned on others who were claiming that there wouldn’t be a downturn in the housing market – that this time would be different.
The thing is human behavior is what causes these cycles – and at some point house prices, interest rates and the exchange rate will start improving. The real problem is that there is no way to tell when that will happen.
Unfortunately this just means that right now it is going to be very hard for most people to emigrate if they are relying on fund from their home countries. I thought we were hard done by when we moved and were getting a paltry $2.50! You notice when it was nearly $4 to the £? Thats when there was a huge spike in immigration to New Zealand – whereas at the moment, immigration is pretty low.
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Christmas pressie from the Reserve Bank
Filed under: Cost of living, Economics, Interest Rates, Credit Cards & Mortgages in NZ, Property & General Investing
Alan Bollard (bless his little cotton socks) has decided that the base interest rate in New Zealand is not going up this month.
“Interest rates are now projected to rise to a more limited extent over the next two years than signalled in September.
Oh Yay! Just in time for my investment mortgages to come off their fixed rates – and there was me thinking that I might have a snowballs chance in hell of reducing my mortgage payments.
Of course the reason for the hold is becuase no one has any money to spend, so the economy isn’t taking off as well as it should. I’m not sure where anyone expects us to get money to spend from right now – prices are still going up and wages aren’t. And to be honest, even if I had any money – what he’s saying is that If I spend it and “help the economy” hes going to put my interest rates up as a result.
Does this make any sense to anyone?
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NZ interests rate holds at 3%
Filed under: Cost of living, Economics, General Budgeting, Interest Rates, Credit Cards & Mortgages in NZ
Alan Bollard (bless his little cotton socks), has held the official cash rate at 3% this morning. There are reasons for this – which basically comes down to we aren’t spending enough, so he has to keep it low. If we were spending he’s have to put it up to stop us.
Well, I’m doing my bit right now to ensure it doesn’t go up!
Overall, continued economic growth was expected to gradually absorb current surplus capacity over the next few years, Dr Bollard said.
Headline inflation was expected to move higher following the recent increase in the rate of GST.
The subdued state of domestic demand suggested this inflation spike would have limited impact on medium-term inflation expectations.
Translated as:
I can hear you talking but all I hear is “Blah Blah Blah”
If this is going to affect mortgage rates, we wont see it for a day or so, but I happened to be checking last week, and compared to a year ago, ASB’s rates are down quite nicely for longer term loans, but up for floating or short term loans. Still way too sodding expensive in my opinion – but ho hum.
As at 05:14:15 p.m., Sunday 20 December 2009
Housing Variable 5.75 % p.a.
Housing Fixed (6 Month) 6.00 % p.a.
Housing Fixed (12 Month) 6.25 % p.a.
Housing Fixed (18 Month) 6.75 % p.a.
Housing Fixed (24 Month) 7.25 % p.a.
Housing Fixed (36 Month) 8.00 % p.a.
Housing Fixed (48 Month) 8.50 % p.a.
Housing Fixed (60 Month) 8.75 % p.a.
ORBIT Home Loan 5.75 % p.a.
As at 09:27:19 a.m., Tuesday 19 October 2010
Housing Variable 6.25 % p.a.
Housing Fixed (6 Month) 6.35 % p.a.
Housing Fixed (12 Month) 6.45 % p.a.
Housing Fixed (18 Month) 6.60 % p.a.
Housing Fixed (24 Month) 6.70 % p.a.
Housing Fixed (36 Month) 7.10 % p.a.
Housing Fixed (48 Month) 7.45 % p.a.
Housing Fixed (60 Month) 7.75 % p.a.
ORBIT Home Loan 6.25 % p.a.
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Will you have enough to live on?
Filed under: Hubby's Views, Jobs & Work, Life in New Zealand
Following up on Avalons suggestion that I find something interesting to say about the LISNZ. We’ve blogged previously about an Immigration report talking on salaries and standards of living for migrants. So I’ll try and compare the information there with what LISNZ is saying.
What do we find?
Median wages are ‘up’ to $23.49 per hour. That’s $48,860 per year. While the Immigration report says on average Kiwi’s earn $10k – $15k more than migrants to do the same work. So Kiwi’s in the same median job will actually earn $58k – $63k per year. An 18% pay differential, which as we see every year when they compare salaries for male & female employee’s is “unacceptable and must be fixed!”
{as an aside, one item that is identified is that the average Pacific Islander is on an average hourly rate of $14.95, while the average for skilled migrants as a whole is $28.09 – consistent with the observation in a previous post about general inequality.}
If a kiwi is earning $10k more than you and you’re already earning $120k, it may not be too much of an issue. At that level of salary, you’re being paid heavily for your skills & experience - not so much to be a person occupying a specific role that ‘anyone’ could do. So direct comparisons are more difficult. Down at the $50k level an extra $10k for a Kiwi to push the same pile of papers round an office is huge.
Perhaps this links with one of the other highlights, that 70% of migrants had enough or more than enough money to meet their everyday needs.
Implying that 30% of migrants don’t have enough money 
The interesting breakdown of stats here is that of those who had enough money initially, one in three (1/3) of them found they didn’t have enough money by year three. Which is after both the primary migrant or skilled principle & their spouse (sorry for the verbiage, that’s what they call us!) have seen a 15% increase in wages! i.e. up to the $48k average per person. On the plus side, half of those who originally didn’t have enough money did feel after three years that they did now have enough money.
While this is of course talking averages, I’m not sure what this is saying about how migrants are coping financially in practice. Either when they get here or three years later. Migrants are more likely to state that they don’t earn enough three years down the line compared to the first six months. When on average we earn more after three years. IS this because migrants are spending capital initially to support their new life? Which has run out by year three? Is it because the “shine” has worn off? Is it because in the first interview – you don’t want to say anything that might offend your new country?
Or it could be the cost of mortgages. 52% of migrants after year 3 own their own home, yet we also know that many Kiwi’s spend more than 30% of their after tax income on accommodation. With rents being roughly half the cost of a mortgage on the same property, having less money and being less satisfied may just be part of having a mortgage!
Unfortunately – theres no just no way to tell as the survey doesn’t ask why people think they don’t have enough money.
The level of ‘satisfaction’ with life in NZ drops between the first year and third year, while the overall number is within statistical accuracy, the number of very satisfied migrants drops 11%, to 35%. This may be as simple as the allure of a new life waning or your life three years in no longer being ‘new’. This also appears to correlate with a decrease in the sense of safety people feel, down 9% to 76%.
Now, both satisfaction and safety are undefined and somewhat arbitrary measures. I may not be satisfied this week if I’d only read the headlines about LAQC’s and felt we were about to sell the family silver to make ends meet. However, this may correlate with people feeling they don’t have enough money to live on. So back to mortgages again perhaps?
(Avalon still gets peeved with headlines in the news here banging on about how we have low interest rates. It’s 7-8% – that’s not low – its a bloody rip-off.)
The split of where people live remains pretty similar, 50% in Auckland, 30% elsewhere on the North Island & 20% on South Island. Although the only noticeable drift was that more people (as a percentage) move to Auckland by year three, than move away from Auckland. Not unsurprising and I know of numerous people in Wellington who have moved up to Auckland even in just the last six months.
So did we learn anything?
Whatever people may think of lifestyle advantages for moving to NZ, 30% of migrants don’t have enough money to live on. That’s something which is easy to measure & quantify. While satisfaction & safety, less easy to measure, also go down with time. This is good to know.
I was at an entirely unrelated education day the other week where the key point of which was to give people an insight into how things ‘really are’, so they can have more realistic expectations about how difficult things may be, prepare better and make a more informed decision before they make life changing choices.
Hopefully people will be better informed as a result of these surveys.
Hopefully Immigration & immigration agents will communicate this information to people.
Until that happens, we’ll keep telling it like it is.
Inequality increases in NZ (?)
Filed under: Cost of living, Economics, Hubby's Views, Jobs & Work, Life in New Zealand
I was reading an article in this weekends’ Dom Post entitled ‘skilled workers reap pay benefits’. The article by Andrew Whiteford from Infometrics talks about the latest inequality statistics from MSD (Ministry of Social Development). Fortunately, Infometrics are good enough to publish it on their website.
The article talks about household income and reasonably points out that just because there is a bigger gap between those earning less and those earning more, doesn’t mean it’s all bad. Fundamentally, with a move to more IT focused businesses rather than manual labour or manufacturing, there is a greater demand for people with skills. The more money they earn, the more money they spend. To spend money, on things like coffee or eating out, you need people in those service industries, who typically earn a low hourly rate.
So; more higher paying jobs, more income, more spending, also means more lower paying jobs (which also presumably leads to more income & more spending since if people didn’t have a lower paying job they would be doing what?? Not earning, or heading overseas to earn money.)
(Or bludging off the state to focus on something as enlightening as a TaxPayer funded “Art Installation” to show the benefits of bludging of the state and refusing to work, resulting in some of the funniest insults ever created on KiwiBlog! – Avalon.)
Now because I’m a little suspicious of the normal standard of reporting, the DomPost even managed to mangle a simple graphic showing employment growth, I figured I would look for the source MSD information.
Only a search of the MSD website doesn’t find this information easily either. We can get to the 2009 report here {which does include a whole bundle of interesting reading}
And Google being your friend, actually takes you off to the NZ Institute.
Which helpfully does cite references back on the MSD website, bringing us back to the information we were looking for in the first place, being the MSD report the Infometrics article is based on. Still with me on this treasure hunt?
The MSD analysis is actually of data from StatsNZ up to June 2009. So while it’s officially a 2010 report, it’s based on data between a year and two years old.
So are we all poor, well off, or somewhere not quite in the middle?
1/ Median income for households has grown evenly between 2007 & 2009. Before this, there had been a big bump up due to the Working For Families (WFF) tax credit. WFF is also responsible for reducing the inequality in income. i.e. those on low incomes get tax credit’s nominally paid for by those on higher incomes. So WFF is working effectively in terms of income redistribution across the country.
2/ Accommodation costs across the country are going up as a proportion of household income. The measure here is how many households are spending more than 30% of their income after tax & benefits are applied on the roof over their head. Whether that’s as rent or a mortgage.
3/ Poverty depends on how you measure it. Even I can’t quite make sense of what the two different measures are actually looking at and what it means beyond that they are looking at ‘disposable income after housing costs are paid for.
4/ Sixty six percent (66%) of two parent families are dual income households. i.e. both parents work. Which is actually down from the 75% level five years ago, and these days a greater proportion of those two parents are both in full time work. Interestingly enough, those 9% who are no longer in full time work are typically not working (in paid employment) at all. And the overall proportion of two parent families with one in full time employment and one in part time employment have dropped. This may be a WFF thing again. If the part time earner is having to work longer hours to pay for child care while they are at work, and overall income drops because the household income goes above the WFF threshold, it makes sense to stop working, get the benefit income and not have to pay childcare costs. Clearly this is just one possible reason, and the report doesn’t provide any real analysis of why there has been this change in the distribution of employment in two parent families.
What the income inequality report doesn’t tell us, is whether low income individuals or households are increasing their income over time to the middle of the pack. The bottom rung then being taken up by young people starting off in the workforce. It also doesn’t tell us whether low income individuals are part time or full time employed, self employed, or indeed whether there is a preponderance of two income households which still have a significantly lower overall total income. The statistics only look at disposable income, so we can infer what overall income looks like by considering the relative cost of housing. Net result, more households across the entire income spectrum across the country have less disposable income left to spend on things like food, electricity etc.
To be fair I can’t see a good way of being able to track the information on progress. So the caveat to all this is that the surveys talk about averages. With NZ having relatively easy access for Pacific Islanders to move here and work, there is also a consideration that not all emigration to NZ is of skilled workers. As has been pointed out before, all economies need a mix of skilled and unskilled people to fill the available jobs. So again, it’s entirely likely that in comparison to a standard of living measured by income, that a low skilled & low paid job in NZ is better than a lower paid job on what many of us would view as an idyllic Pacific island.
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