Indexgroup Newsletter

Hi [salutation],

Spring is in the air and with it the Annual Mortgage Massacre, which usually accompanies this time of the year as the major banks fall over themselves to commit commercial suicide by offering you, the borrower, interest rate discounts that are impossible to sustain.

The only problem is that this year sanity seems to have prevailed much to borrowers disgust...

1. OCR Review- What now?

The good news is that there doesn't appear to be any further rate rises on the horizon with most ecomomists picking that the next move in the OCR will be down. The bad news is that its not likely to be for some time so get used to interest rates at and around 9%.

Interestingly the Reserve Bank Governor made specific mention of tax cuts being inflationary, which may be a bit of a worry given that the chance of these next year are pretty much 100%. That said compared to recent OCR announcements this one from a borrowers perspective was actually pretty good although risks remain on the upside and in my view, fixed rates of about 9.5% are likely in the not too distant future.

2. If I was a borrower...

Without wishing to sound like a broken record I would be looking to fix for 2 years at present. I'm also going to break Rule #1 which is: 'Never tell on Yourself' and do just that.

Those of you who have been with us from the start will remember me (and every economist in the country) telling you two years ago that if you were to lock in the current 2 year rate, when it came time to refix we should be on the other side of the cycle and you could pick up a 'cheapie' on the way down. With the benefit of hindsight it is now obvious that our timing wasn't quite right.

We are currently still at the peak of the cycle with a drop in interest rates not looking too likely until the middle of next year at the earliest. On that basis 2 years remains the favoured option at present.

3. Insurance

We have recently added a couple of specialist Risk Advisors to the team in Ali Toumadj and Steve Jennings to work with you on such delightful matters as Mortgage Protection, Life, Health and Income Protection.

One thing that has struck me recently (you can probably guess what I've been up to) was the value for money of Mortgage Protection Insurance. In laymans terms this cover means that for those with an average sized mortgage, in the event of the unexpected happening, you could not only avoid losing your house, but actually own it, freehold, for about $9/ week.

From a personal perspective this not only sounds like a good way to avoid a whole heap of drama (my wife would get really grumpy if we had to move house) but seems a pretty common sensical approach to de risking what is your biggest liability- your mortgage. If you want to chat it through flick Steve an email at steve@adamparore.co.nz and he can run you through it.

Thats about it for now...