Will New Zealand’s interest rates fall again this week?
Filed under: Banks, Interest Rates, Credit Cards & Mortgages in NZ, Property & General Investing
The reserve Bank of New Zealand meets again on Thursday this week, to decide on Interest rates.
According to Interest.co.nz – it is expected that Alan Bollard (bless his little cotton socks) will reduce the official cash rate (OCR) by 100 points (That’s 1% to us normal people).
Of course – this is no use whatsoever to me personally when I have 2 large fixed rate mortgages with another 4 years to run, and I know I’m not alone.
And it won’t help that many first time buyers as the banks are being rigidly unhelpful at the moment – you need a 20% deposit to be able to access the new low mortgage rates. For the same reason – I am not the only property investor who can find really good cashflow properties; but cannot actually but them.
Interestingly – if Mr Bollard does reduce the rate by 1% -taking it to 4% – it will mean that New Zealand has the lowest official cash rate it has ever had since the OCR was introduced in March 99 – when it was at 4.5%.
You know – the one thing that really peeves me about all this – is that Mr Bollard has not apologised for screwing up the interest rates in the first place. Now – it is just my opinion – as a non-economist – that he did in fact screw up – but I vividly remember his snotty pronouncements last year that he had to hammer us all for spending too much money, and he would keep raising rates till we did as we were told.
So having left many people, including banks and mortgage brokers, with the expectation that rates would keep climbing and climbing till he had inflicted enough pain – he then did the most amazing U-turn and rates have been dropping like a stone ever since. Which leaves a lot of people up the swanny. If you can’t access the new low rates – you are still paying around 9%-10% on your mortgage, with no way of getting out of it. (The Break fees basically mean you pay the next so many years of interest in one hit).
It is an uncomfortable time for many people. We are personally in an OK position. We did not have time to overextend ourselves with our rental properties, and we still have a relatively high income – which means we can actually pay all our mortgages – even at the high rates. And we do have emergency funds to call on, and shares we could sell if we had to. Many people who fixed their mortgages in the belief that Alan Bollard would keep raising rates as he said he would – are not in such a good position.
While I do not think either the banks or the Reserve bank should take responsibility for the decisions of individuals to overspend – I do feel that they could be just a little bit more contrite about their own roles in the ensuing financial crisis. As ever – it is businesses and banks that get guarantees and bailouts.
Individuals get bugger all and forced into Mortgagee sales.
Wehey! We Don’t Need to dip into our Emergency Fund after all!
I mentioned here that we may need to dip into our emergency fund:
IBM were only taking staff on as 2-year contractors, and that was coming to an end next April, and hubby has been trying for months to get the contract made permanent.
Finally, after a lot more hassle and way more meetings with managers than should have been needed, the approval has come through for Hubby’s contract to be made permanent.
The funniest thing? Or perhaps the most utterly annoying and frustrating thing (that had us screaming and grinding our teeth)?
15 people had to sign off on making the contract permanent:
Manager (New Zealand Based)
2nd Line Manager (New Zealand)
2nd Line Business Executive (Aus)
Finance Manager (NZ)
HR Manager (NZ)
Resource Manager (Aus)
Talent Leader (??!) (Aus)
HR Manager (Aus)
3rd Line Business Manager (NZ)
General Manager 1 (Aus)
General Manager 2 (Aus)
General Manager 3 (Aus)
Finance Manager (Aus)
Vice President of Finance (Japan).
Director of HR (China)
Notice: only 5 people on that list are actually based in New Zealand!
Maybe THIS is why so many migrants find it hard to get job offers from NZ companies. The problem we found, both here and with Unisys, is that the New Zealand company is seen as a bit of a poor relation to the Australian branch. It’s not the first time that hubbys job has been decided by people in Australia rather than New Zealand.
Anyway – as we were shoving extra money aside – we now have a few extra thousand dollars in the emergency fund. I figure it may as well stay there.
But as we don’t need it just yet – I’m going back to pouring the money into the mortgage. I was able to divert my normal mortgage payments into the slush fund because I’m years ahead on the mortgage anyway – but I have to say I’m real glad to be able to get back to killing the mortgage!
P.S. All this effort was just to get approval for the transfer. Salary negotiations are still to take place.
Why do you need an emergency fund?
Filed under: General Budgeting, Jobs & Work, Retirement, Pensions and Kiwisaver
You often hear people saying you should put aside at least 3 months expenses as an emergency fund. So – how many people do you know who have done that?
Not Many? A few? None?
Well, we have a “situation” looming where for the second time since moving to New Zealand – we may need our emergency fund.
The first was when Hubby was “made redundant” from Unisys, after the installation of a new manager who really didn’t like him. (The feeling was mutual). Hubby really disliked the job, and morale in the company was at rock bottom, with staff leaving in droves. (Over the 15 months that he worked there, the staff levels were reported to have gone from 600 to 400).
The redundancy notice came in on the 4th December (our wedding anniversary as it happens – a nice pressie!). Hubby managed to wangle some redundancy pay – so he was the only person to get a bonus that year – but it was only another month’s salary.
It took till April to get a replacement job. This is primarily because a/ He costs a lot to employ and b/ no one cares about looking for new staff in the run up to Christmas and c/ people care even less about looking for new staff during January because the beach is calling.
So for a few months – we had to manage with no income. We still had bills to pay, had to put steaks on the Barbie, and had to pay the mortgage. Without some funds behind us – we would have been stuffed.
As it was – we got through with a sense of freedom and managed to spend quite a bit of time at the beach and Hubby didn’t have to spend all day every day looking for work.
The new job came from IBM, who hubby had worked for for 10 years in the UK. So it was a good fit, and something he really was chuffed to get. Only problem was – IBM were not taking on Permanent staff - but only willing to sign a 2 year contract, to be converted to a permanent hire once you prove yourself (the 10 years in the UK busting a gut evidently did not constitute such proof).
Well, the 2 years are up next April. After 6 months of wrangling – there is still no sign of the promised permanent contract (apparently its stuck on someone’s desk in Asia Pacific waiting for a signature – it doesn’t do to rush these things). So hubby is once again having to look for a new job just in case.
Only this time – we are in a country that like everywhere else is in financial turmoil, so we have no idea at the moment how this will affect the search for a new job. We know we have income till April, but after that – well – your guess is as good as mine.
So once again, I’m immensely grateful to have set aside funds for this. It means we can last till August if the worst happens and the new contract doesn’t appear and it all goes to hell in a hand basket. I’m spending between now and then just adjusting our spending to allow me to add more to the slush fund, so that we don’t have to panic.
Its something we have found really odd about our lives in New Zealand – this lack of longevity in the jobs. I guess after 10 years with the same employer – you don’t really think that you are going to get through 3 in 4 years. We haven’t really got used to the fact that people change jobs so rapidly, and at least in the IT sector, the companies seem to be fine with this.
So yeah – 3 months slush fund. Be different – and be one of the few to get one set up. Then if this whole new-job-needed-every-18 months is not just us – you don’t have to panic – and can spend some of your redundancy time like this:
Being made redundant - Kiwi Style
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