Coronavirus: Further implications on NZ bank’s appetite for home loans

– Hi, it’s Connie from Prosperity Finance. How are you? Now, we all know Coronavirus has become the most upsetting news at the moment. Make a lot of people panic and
also, create a lot of fear. The fear around getting
infected by this virus, but also fear of losing the job, fear of business not surviving
over this period of time, which is really upsetting. We’ve recently been asked
a lot by our customer, in terms of what’s the interest
rate going to look like, ’cause they worry that
they may not be able to keep paying interest’s cost. And also, we’re asked a lot in terms of if it’s a good year to invest in New Zealand property market this year. So I’m going to cover my
view on both of these. Also, I’m going to share
bank appetite right now. So firstly, let’s look
at the interest rates. Now, this morning, coincidentally, Reserve Bank made a
breaking news announcement, which is reducing the
OCR from 1% to 0.25%. Now 75 base point reduction is huge. The banks immediately pass on these cuts to their floating rates. So if you have a floating loan, or you have a revolving or
offset loan, really welcome news. In terms of fixed term,
we’re still waiting to see. My pick is they will be reduced as well, but probably at reduced degrade. May not be in the 75 base point, but even a letter
reduction is a great relief for a lot of us. Okay, so that’s about the rates, so it’s going to keep low or lower. In terms of property investment, when we came back from
the New Year holiday, we feel the property market
is really, really hot. The reason I said that because number one, we have more inquiry by this year than previous year same time and also, our clients who have
purchased a property also was much higher than what the system, the estimate market value is. So that means they’re confident, that means the market are
going to grow this year. Well, now given the coronavirus
play a critical role in terms of people’s confidence. I think some people will defer that plan of upgrading a home or investment property so they make sure they still have money to put food on the table and
make sure their family are well so probably some people will withdraw from property investing market, but on the other hand
some people may think it’s a good opportunity now to invest, because firstly the
investing cost is lower, ’cause the interest rate are lower. Therefore their return will be higher. So this could be a
better investment option than other investment strategies such as shares and bonds et cetera. Also, when the rates get reduced, the borrow capacity
normally goes up as well, because they have more disposable income to service a new loan. So that probably ignites
some people’s minds in terms of property investing. So my pick for the
property market this year is going to be continue growth but probably at reduced pace. Lastly I’m going to share
with you bank appetite which we observed recently. Now I’ll give you an example. A client who is a tour guide. He had a houly rates pay
rise before Christmas. When he applied home
loan to buy a first home, the bank normally would
considered a permanent pay rise, but in this case they
wanted to use the old rates. Now the reason behind this is
they worried about their pay, the increase pay would
continue given what’s going on with the coronavirus. That’s kind of surprise. Now, another well-known
broker, I read the news. He has a clients work for
Air New Zealand for 25 years and because recently a lot
of flight were canceled, their income also get reduced. As a result, banks start worrying about theirs loan servicing ability so the bank actually didn’t
approve his amount of loan that they would normally do
before having the coronavirus. If you work in the industry
will get affected by coronavirus bank probably scrutinize the
continuity of your income. They may become more conservative, more scrutinize your pay,
so you may get reduced kind of approve amount now. So just pay caution, ’cause they are right now happening and I think it’s going
to affect more industry and affect more people’s
borrowing capacity. So, thank you for watching. I hope you find this
information update useful. You take care of yourself. Take care of your family and if you worry about
your loan repayments, worry about your plan in
terms of upgrading your home, anything to do with change your property, change your loan, then
probably best to talk to us first so that we can help you. Thank you for watching again. I’ll see you next time. Bye for now.


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