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Auckland feels effect of LVR limits

The loan-to-value (LVR) restrictions reintroduced by the Reserve Bank are having a far greater effect on Auckland house prices than anywhere else in New Zealand: [READ ON]

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NZ economic outlook downgraded

Weaker prices for agricultural exports have led Fitch Ratings to revise New Zealand’s growth outlook down.

Wednesday, January 27th 2016, 11:27AM

by Miriam Bell

The ratings agency has left the country’s sovereign rating unchanged at AA, but it has changed its outlook from positive to stable.

This is because it has revised down its assessment of New Zealand's near-term growth prospects, as the outlook for the prices of its agricultural exports have deteriorated.

It estimates GDP growth slowed to 2.3% in 2015 and expects GDP growth to pick up to 2.4% and 2.6% in 2016 and 2017.

Fitch analyst Mervyn Tang said this was a slower pace than forecast in their July 2015 review.

A slight rebound in business investment is expected, while ongoing high immigration levels should support consumption growth.

But this will be partly offset by lower dairy production and slower residential investment growth, Tang said.

“Stronger construction activity in Auckland will be unable to fully replace a decreasing contribution from the Canterbury rebuild.”

Further, uncertainty over the external environment, migration rates and the impact from El Nino weather conditions represent risks to the forecast.

The Reserve Bank has estimated that dairy losses would be manageable, even in a severe scenario, Tang said.

“However, this scenario does not assume a more broad-based economic slowdown, or any concurrent correction in the housing market.

“A combined stress scenario could have a much greater impact on the health of the banking system.”

While the ratings agency expects the RBNZ’s new LVR measures to slow house price growth, it said ongoing low interest rates and fast population growth could continue to add upward price pressures.

But a significant downturn in house prices could impact badly on New Zealand’s outlook.

Tang said one of the main factors that could lead to a further rating downgrade was a negative shock with a lasting impact on growth, employment, public finances and the banking system.

This could be a steep rise in external borrowing costs, prolonged weakness in the dairy sector, or a sharp reversal in house prices.

The other such factor would be evidence of net external indebtedness becoming unsustainable.

Meanwhile, HSBC has also predicted 2.4% growth for New Zealand in 2016.

The bank’s chief economist Paul Bloxham said that, although this was solid growth, it was below trend.

He also said that, despite strong tourist numbers and rising house construction in Auckland, low dairy prices will remain a challenge.

“Solid growth may not be enough to keep inflation on target, which means the Reserve Bank is likely to cut the OCR further, despite financial stability concerns.”

Fitch’s downgrade comes just before the RBNZ’s first OCR statement of the year tomorrow.

While the RBNZ is widely expected to leave the OCR unchanged tomorrow, speculation about further cuts this year – perhaps as early as March – is growing.

Tags: banks interest rates OCR OCR forecasts Ratings RBNZ

« OCR cuts to come – but not nowWhat the Reserve Bank said to start the year »

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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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