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NZ faces rising financial system risks – S&P

Robust house price growth – particularly in Auckland – is elevating risks to New Zealand’s financial system, according to Standard & Poor’s latest Banking Industry Country Risk Assessment (BICRA).

Monday, August 17th 2015, 10:43AM

Standard & Poor’s credit analyst Nico De Lange said the risk of a sharp correction in property prices has increased.

“And if prices were to fall steeply, New Zealand's structural external weaknesses - such as its persistent current account deficits, high levels of external debt, and exposure to commodity price fluctuations - will worsen the impact on the economy.”

This would lead to the cost of external borrowings rising and domestic credit conditions tightening.

The currency might also depreciate sharply, and economic growth would slow down.

All of which would result in lower income levels.

As a result, the ratings agency has revised New Zealand’s BICRA score to '4' from '3’.

The BICRA scale runs from 1, which is the lowest risk, to 10, which is the highest risk.

Standard & Poor’s  also cut its stand-alone credit profiles on New Zealand's big four banks, and lowered its ratings on seven New Zealand financial institutions.

While it affirmed the ratings on 11 financial institutions, it lowered the stand-alone credit profiles of six of these.

The agency said none of its ratings actions was due to higher existing or emerging risks specific to the institutions themselves.

However, Standard & Poor’s analysts also said their base-case expectation is that a sharp house-price fall is unlikely to take place, despite the increasing risks.

The agency believes that the heightened economic imbalances in New Zealand will unwind in an orderly manner.

It also noted that Auckland’ current house-price appreciation follows a period of restrained growth in private sector debt and national house prices from 2007 to 2011.

Tags: banks S&P

« Home loan lending takes lower prominence at ASBProperty prices to blame for S&P downgrade »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.95 3.29
ANZ 4.44 3.10 3.50 3.84
ANZ Blueprint to Build 1.68 - - -
ANZ Special - 2.50 2.90 3.24
ASB Back My Build 1.79 - - -
ASB Bank 4.45 2.55 2.95 3.29
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.55 2.95 3.25
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 4.55 3.15 3.22 3.85
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 1.95 1.85 2.35 2.45
Heretaunga Building Society 4.99 3.80 3.90 -
Lender Flt 1yr 2yr 3yr
HSBC Premier 4.49 2.19 2.45 2.69
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 2.15 2.35 2.75
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.75 3.34 3.34 4.14
Kiwibank - Offset 3.75 - - -
Kiwibank Special 3.75 2.49 2.49 3.29
Liberty 5.69 - - -
Nelson Building Society 4.95 2.99 3.24 -
Lender Flt 1yr 2yr 3yr
Pepper Essential 4.79 - - -
Resimac 3.39 2.98 2.79 3.29
SBS Bank 4.54 2.69 2.99 3.29
SBS Bank Special - 2.19 2.49 2.79
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - ▲2.29 - -
The Co-operative Bank - Owner Occ 4.40 ▲2.49 ▲2.89 ▲3.19
The Co-operative Bank - Standard 4.40 ▲2.99 ▲3.39 ▲3.69
TSB Bank 5.34 ▲3.30 ▲3.69 ▲4.04
TSB Special 4.54 ▲2.50 ▲2.89 ▲3.24
Wairarapa Building Society 4.99 3.55 3.49 -
Lender Flt 1yr 2yr 3yr
Westpac 4.59 3.15 3.49 3.89
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.89 3.29
Median 4.54 2.68 2.99 3.29

Last updated: 19 July 2021 9:09am

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