Island Life: Vendor says sell!
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Fletch, I'm feeling similarly stoked about my entrails reading. My fixed rate came up for redocumenting just before our election. I asked the bank which way they thought it was going, and they said up. I asked people at my wife's company (stockbroking and funds management), and they said it would go up. I asked Wall Street (by watching what they reckoned on CNBC) and they thought it would go up (most of them).
Then I asked myself. How can it possibly go up, when just about every government treasury in the world is talking about emergency measures, the foremost of which is to encourage banks to lend again by putting the cash rate down?
How can the finance industry not see this? I see 2 possibilities: 1. They are indulging in wishful thinking. 2. They are lying and just want me to lock in a high rate, so when the rate does go down, they get more cream from me.
Anyway, I went for the shortest term possible, at a slight premium, and about a week later Bollard cut the rates by 1%, and he's just dropped it again. If it keeps dropping we're going to have absolutely perfect timing to lock it in when it is at near rock bottom. I'm assuming it can't go below zero :-).
I'm no whizzkid. I'm sure most of the mortgage holders in the world have access to the same reasoning, and this is part of the crisis. We're all holding out for the bottom. So the banks really are screwed. Which ultimately means we are screwed. I guess this is what a cycle of negativity is like. I hope it doesn't go that far, but at the end of the day I don't have the resources or the intention to prop the banks up to save the system myself. That can only be done as a collective effort.
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Remember, two years ago the banks were returning 8% or more on investments; by comparison with that, 9% from an investment company wasn't high enough to set off any warnings.
Yeah, it could have been higher. 9% is just the first figure that popped into my head because I remember it being advertised on telly (don't get me started on the way that Geneva Finance used an English accented voice to pitch to investors and Jay Laga'ia to pitch to borrowers). But I don't remember getting up as far as 8% for my (long departed) savings, and I was always on the lookout for the best deal.
I remember stories in the major newspapers about several people who lost their life savings because they'd put it all in Bridgecorp, because their interest rate was higher than anyone else's. It was a classic case of it looking like a really really good basket to put all your eggs in.
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I hear Slumdog Millionaire is quite good.
Not enough cars, guns and explosions. And the producers exploit 3rd world children. But mostly not actiony enough.
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We're all holding out for the bottom.
The same is probably true of the sharemarket, which is why I think there is a lot of hurting going on.
Following on from Slarty's break fees point. I checked mine out recently, and I haven't been bothered to check the actual formula (partly because I don't have one of the required numbers, which I guess is made up by the bank), but the break fee seems to take into account the likely fall in interest rates over the period of the loan. So now that it is really freaking obvious to everyone that rates are going down, that's largely priced into the break fee.
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Actually, I just this minute got the email from the bank with their new lower interest rates. Curiously, the break fee almost perfectly matches the interest saving between the new fixed rates and my existing one. So they obviously had an idea in advance about what the new fixed rate would be. Now with hindsight I wish I'd broken yesterday, moved to floating, and waited a month to fix for 6 months. However, I'm not dealing with a very big win or lose either way, so I don't overly care.
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Craig:
Balls, Rich. More like middle-class twats who vote took on debt they couldn't realistically service to buy grossly over-valued property, and I don't think anyone would find it politic to say "well, sometime you roll the dice and get snake eyes, suck it up."
It seems that right now there's little point in keeping up with the Joneses, when they've just been paid a visit by the foreclosure agent and the repo men all at once. Poetic justice.
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And the producers exploit 3rd world children.
Ah, yes... Can I just note the irony of accusations being fired at Slumdog Millionaire "unrealistic" depictions of Mumbai, and exploiting child actors by an industry hardly known as a bastion of documentary social realism and being a world-leader when it comes to pay and conditions. Just saying... And to be supercynical, I don't think anyone would give a shit if Slumdog hadn't turned out to be a sleeper hit scoring serious (and seriously unexpected) award-season love.
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I don't have the resources or the intention to prop the banks up to save the system myself . That can only be done as a collective effort.
I believe Gareth Morgan was agreeing with you on Campbell Live last night (streaming vid).
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Lx,
...but the break fee seems to take into account the likely fall in interest rates over the period of the loan. So now that it is really freaking obvious to everyone that rates are going down, that's largely priced into the break fee.
That's pretty much exactly how my bank chappie explained it to me a couple of years ago. They ensure that they still get the same amount of interest that they would have got if you'd stayed on your existing fixed rate. Which seems fair.
I was enquiring at a time when interest rates were going up &, oddly, he was only going to charge me $300-odd to break $400K+ with 4.5 years left to run. Maybe they figured they could re-lend the money to someone else & get the higher interest rate from them, but it seems a very specific view of that particular $400K.
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About 10 years back we had reason to break out of a fixed rate with Westpac (who may have been WestpacTrust then) while the floating rate was higher than what we were fixed at. They actually paid us money for breaking the fixed rate.
The last time I fixed my rate I mentioned that in passing to my mortgage manager and she said "yeah, we don't do that anymore". I wasn't shocked. -
The last time I fixed my rate I mentioned that in passing to my mortgage manager and she said "yeah, we don't do that anymore". I wasn't shocked.
You mean banks are profit-making enterprises whose shareholders expect some kind of return? Well, bugger me with a feather...
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I was enquiring at a time when interest rates were going up &, oddly, he was only going to charge me $300-odd to break $400K+ with 4.5 years left to run. Maybe they figured they could re-lend the money to someone else & get the higher interest rate from them, but it seems a very specific view of that particular $400K.
Same thing happened to me when we sold our house in Grey Lynn. The last three years we've been generating a reasonable junk of interest from the bank that we've used to pay for rental accommodation and some expenses. It looks like we might have to have a look at an alternative way to make a return, however the last year really gives me no confidence about investing in the market. The only thing that looks like growing is the unemployment graph.
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however the last year really gives me no confidence about investing in the market
Never heard about buying low? The market is due to rebound any minute now. You know, like in Japan.
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Moz,
What peeves me is all this talk of cheap holiday homes being readily available. But strangely the only ones I've found are horrid McMansion-on-the-Bay type places that were wildly overpriced (even to someone unlike me who wouldn't buy one for any price) and are now just overpriced. They're still heaps of junk. Sure, half a million bucks for something that last sold for two is cheaper, but when you're talking bad architecture built on sand dunes... any price is too high.
I'm more hoping that an acre or two in the Sounds with some kind of shack on it drops into the realm of affordability, but unfortunately it seems that the sort of people who buy those are not likely to let them go.
(and in Melbun where we are rental prices are still subsidised by insane tax laws, so renting is half the price of owning. Maybe less... $600k house for $24k/yr... you do the maths)
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Never heard about buying low?
That's Gold.
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No one seems to grasp that a major reason why we are suffering (we- that is us losers who fixed at a time, like last year when rates peaked, was because that was the only way we could afford to keep paying the bloody mortgage) is that the reserve bank was then pulling hard the only lever it has - interest rates- to derail the inflation generating runaway train property boom while the Labour led govmint sat on its hands. Result = highest interest rates in the OECD. NOW, that the world is falling apart, Bollard lets the lever loose and my how those numbers fall. Lets get this straight, OWNING ONE BLOODY HOUSE THAT YOU LIVE IN IS NOT SUPPOSED TO BE A BLOODY GAMBLE or a property investment or a means of controlling the spending habits of others or a means of buying a boat you wouldn't normally afford. I have no answer to all this, but it seems to me that the artificially high interest rates we used to have caused the pain in the first place. This is just the damage that this broken reserve bank act generates. Family Pain
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For want of anywhere else to post this: Brian Gaynor's utterly damning assessment of Nathan's Finance:
The $3.7 million of related party loans on the asset side of the balance sheet appears to comprise loans to Sally Hotchin and Joanne Doolan, wives of the directors. Some of these were capitalised interest loans.
It beggars belief that a public issuer which promotes its "robust credit assessment process and strong level of corporate governance" has 97 per cent of its loans to related parties and, when it goes bust, very little of these loans are secured against real assets or are recoverable.
It appears these people never had the first intention of handling in good faith the money people invested with them.
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We fixed (with 16 months remaining) knowing that what we negotiated, we knew we could afford ,no matter what the market did and to float in effect was a gamble that we couldn't budget for so it was security that we opted for and figured if the shit hit the fan we would still have a roof over our head. The thing for us is if we need to borrow more ,we are now in a position to afford to (but not something we like to do much anyhow) and what I learnt was that the going rate is negotiable when the time comes for renewal. I informed our bank last time that competition was prepared to offer better than what our bank was offering and they came to the party pretty quick on negotiating a good deal, and all on the phone.
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It appears these people never had the first intention of handling in good faith the money people invested with them.
yeah we will read more about them I am sure. First we saw Hanover (handover). I just see same shit different day, and how many other companies branch from this crowd?
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I have to agree with you whole heartedly Sofie. The term that was was the most important to our family when it came to the term of our fixed rate, was the number of years 'till our wee girl is school aged. Knowing that our repayments are achieveable until a second income is an option is far, far more important.
We do still however feel that we have some breathing space knowing that we bought in 1997 for $100k and the last valuation was $300k. With tose figures we should be able to live through at least one or two fixed interest rate blunders and at least walk out wit a roof over our heads. -
same shit different day
Yep, corrupt wide boys with a raging sense of entitlement, enabled by slack enforcement and a culture of insider trading and poor financial literacy. Spose I'd better stop now before one of them goes all Stiassny on me..
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Spose I'd better stop now before one of them goes all Stiassny on me..
You will be fine as long as your case is too confusing for a New Zealand Jury.
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True. Now where's that old wine box I had lying around..
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WH,
I'm not entirely certain, but I think your comments put you at odds with Colin Espiner -- and some consider him to be New Zealand's finest political commentator.
Look - I don't take Colin to be suggesting that we respond to uncertain times in an ignorant or simplistic way, but by the same token we can't afford to make the mistakes that Chicken Little or Pollyanna might have made. As Colin says, Key's speech needs to be realistic and positive -- it needs to deal with the problems of the moment while looking to the future. Key needs to make the kind of sober, flowery Churchillian noises that will help us retain a sense of perspective.
Sure, it's going to be a tough year for some, but let's not lose sight of the fact that others are going to do very well.
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We made the decision, to live in a modestly improved 1930s farm pump shed. It might be a bit tricky to sell for big numbers. But thats hardly the point of home ownership, at our house.
Sounds like an interesting house you have there Steven. We have friends in hand built pole houses and 1/2 round barn conversions(with views to die for to boot) and they wouldn't consider any number big enough to sell. We had an idea once to sell but the more your house becomes your home, the more difficult it is to go.When I realized that the hard slog my other 1/2 put into this place was not just a reno,it was from his heart, it then became a bigger part of us. Neither of us plan to go anywhere in any hurry. We know we would make money to sell but what for? To walk away to do it somewhere else? To change town? To do it again?To buy up? I considered that seriously and couldn't find a health benefit so couldn't see the point. Home sweet home.:)
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