Mortgage Express, our lending partner reports that ne of the main stream banks launched a new incentive package for First Home Buyers yesterday consisting of:

* up to $1000 towards legal fees
* A voucher for Noel Leeming’s
* Application fees will be waived
* Free AP and bill loading for 3 months
* Credit card fee waived for the first year - specific to new cards only
* True rewards fee is also waived – this is specific to new True Rewards accounts

It is a great time for customers to buy with good packages on offer from the banks, 95% lending, legal fee contribution and great rates and discounts.

We can help you get your first home, cal us and we’ll help you make your move!

With the banks economists predicting one thing and the rates doing the opposite, it is quite confusing at the moment to try and understand what the rates might in the future, especially so for first time buyers. The ASB Economists had this to say:

The Reserve Bank of New Zealand (RBNZ) began lifting the OCR by 25 basis points in both June and July, bringing the OCR to 3%. We expect the RBNZ to take a break from lifting the OCR in October and December. We expect rate hikes will resume in January, with the OCR steadily increased by 25 basis points at each meeting until the OCR reaches 4.5%.

Following the lifts in the OCR, floating rate mortgages have started to increase, and we expect the floating mortgage rate to continue to rise over the next year in line with future OCR rate increases. This may prompt some borrowers to move to fix the floating part of their debts. Our calculations suggest there is not much cost difference over a 2-year horizon between floating and fixing. This means the certainty of short-term fixed rates now comes at very little cost. In addition, the recent decline in the 2-year rate does marginally increase its attractiveness, although we do emphasise a large degree of uncertainty remains around the pace of OCR increases over the next year.
Beyond the 3-year mark, fixing remains expensive (despite recent declines in rates) but there is the benefit of more certainty if that is an important factor in the decision. Indeed, if this is something you are willing to pay a premium for, then now is an opportune time to fix as there is no guarantee 3 to 5 year rates will remain this low for long.
The trend over the next year will be for shorter-term mortgage rates to start lifting back to average, or slightly above-average rates. With long-term fixed rates relatively high, it is really only the floating or short-term fixed rates that offer value. Priority will be dictated by borrowers’ preference for maximising the chance of low debt servicing costs or smoothing the inevitable increase in mortgage rates.

Current rates:

Floating   6.10%   Westpac Choices
6 months   6.25% Wpac
1 year   6.45%   All banks
2 year   6.85%   All banks
3 year   7.15%   National Bank
4 year   7.45%   ASB & Wpac
5 year   7.75%   All banks

The million dollar question that

we are asked at the moment is

“what do you think will happen to the interest rates

this year, how high will they go?”

A lot of people are uncertain about what’s happening with interest rates so they are going on the floating rate to watch and wait. People are doing a mixture of variable and fixed rates and we want to make sure when they look at what’s available they see they get a good rate.

One of the major banks says most people are looking to fix because it is perceived that rates will go up in the middle of the year, however there is still strong demand for the floating rate with 40% of drawdown’s on the floating rate.

Another economist says we are seeing a change in the floating rate now because of weak data and unemployment numbers which suggest the official cash rate, which is at a record low of 2.5%, won’t rise until June. Previously many economists were expecting a rise in March or April. He says if any other banks make movements he expects them to be minor because there has not been much of a change in 90-day bank bill yields and it is more expectations of them changing rather than the immediate cost of borrowing changing.

He believes the option of floating looks best for most people and as we approach the time when floating rates start rising – mid-year – for a while the optimal thing may be to fix one year, as many are still choosing to do at the moment. His advice for borrowers is to budget for about a 3% rise in floating rate borrowing costs between the middle of this year and the end of 2011.

No change from last week with Interest Rates of the week:

6 months  5.69%

12 months  6.15%

18 months  6.60%

24 months  7.20%

36 months  7.79%

48 months  8.49%

60 months  8.60%

ASB however did move down their rates this week, which is a welcome change as they have been leading the charge with rates going up!

Buying at auction avoids the traditional offer/counter offer negotiation process. An auction is an exciting, competitive environment where everything is out in the open. You can see your competitors and keep track of each and every bid. No deals behind closed doors!

Here’s my advice!

Before the Auction:

Once you have identified a property that you are interested in, you’ll know the date by which you need finance. You can sell you existing property, organise a building inspection, check the LIM, and ask your lawyer to check the title, and auction documents.

Ask to see the REINZ Code of Practice for auctions, and ask the agent whether they and the owner will comply with those rules. There should be a signed copy on display.

Ask your sales consultant to give you a better idea of the local market. The consultant should be able to provide you with an overview of the local market, or ask Zoodle! Zoodle has sales statistics and information on every community in New Zealand. Or you should consider obtaining an independent valuation from a Registered Property Valuer as a guide.

If you have never attended an auction before, you should definitely attend one before the auction of the property you are interested in. This will help you get a feel of the auction process and it’s various features.

Sometimes though, a property sale never makes it to auction day. Someone makes the seller an offer they can’t refuse and the auction is “brought forward” or “sold prior”. At Harcourts there is a system to ensure fairness to all.

If you are interested in a property let the sales consultant know. Then, if another purchaser submits an offer that is acceptable to the seller, you will be contacted and given the opportunity to present your own offer. Sometimes an auction will be conducted several days or weeks before the advertised date, and all interested parties are given the opportunity to purchase the property.

Inspect the property as many times as necessary. If you have any doubts, get a builder, plumber, electrician or any specialist to advise you.

Check the auction documents. Make sure you are familiar with all the details and conditions of sale, (the deposit, possession date, balance of payment, list of chattels, etc). You don’t want any unpleasant surprises on auction day.

Arranging finance before auction day is essential. Have a chat with a mortgage broker or with your bank. Don’t forget, an auction sale is unconditional, so it’s vital to have you finance confirmed before you bid.

On Auction Day:

• It’s your last opportunity to ask questions before the bidding begins.
• The auctioneer will begin by reading the terms and conditions of sale and then give a sales pitch about the property.
• Most auctions are held “subject to a reserve price”. This is the price below which a property may not be sold.
• Making a bid involves making any gesture that attract the attention of the auctioneer. If the auctioneer is unsure whether you made a bid he/she will ask you to confirm it. Be aware that any bid you make over the reserve price could be the one that buys the property.
• “Passed In” is the term used when a property fails to reach the reserve price. The highest bidder usually has the first opportunity to negotiate with the seller or their agent.
• If you are the successful bidder on the day you will be asked to sign the contract and pay the deposit. the deposit is usually 10% of the purchase price.

If you have any questions about any auction, whether a Harcourts auction or another company’s auction and need assistance of any kind please do not hesitate to contact Tony White on 0800 61 8888.

A Mortgage Broker can help lead you through the mortgage application process independently from the banks, get you a great deal and work with you to reduce your debt.

How did the Mortgage Broking Industry evolve?

Years ago, if you wanted to get a loan you needed to go to the bank and speak to your personal banker or branch manager. The banker had most likely been there for years and over time knew you very well. Customers hardly ever changed banks and the experience of applying for a loan was stressful and scary. I remember going to see my bank manager back in the seventies, I left in tears, no loan and feeling very small.
As banks changed and became like any other business – looking at meeting budgets and targets – the personal banking staff were streamlined and at the same time staff turnover increased, meaning the long term banking relationships no longer existed.

Mortgage Brokers came into the market, as they fulfilled a need. Clients could build a long term relationship with a broker, the process was friendly (not scary) and you could access all the lenders in one meeting. Along with this the broker could negotiate a very good package on your behalf.

All this, and the service the brokers offered was FREE because the lenders paid the brokers a commission.

What has changed?

Well, like a lot of industries and businesses the internet has changed everything. If you previously went to a broker to find out what the lenders could offer and what the best interest rate was, you can now just as easily do this by searching on the internet.

So why use a broker at all, are they obsolete?

Most clients would say that the main search criteria is the interest rate; if this is the case then it would be much easier to simply search the internet. So if it is only about the interest rate why use a broker at all?

This is likely to be the largest debt you have – shouldn’t you take care to look at all factors not just the rate. Shouldn’t you also have regular reviews to ensure the best debt reduction strategy for you is in place? The extra things a broker can do for you…

1. Run a needs analysis to see what you need now and what your future needs might be
2. To recommend suitable loan products, and advise why they would match your needs
3. Recommend ways to improve debt reduction
4. Help package, present, and negotiate your loan with the chosen lender
5. Assist you throughout the loan process all the way through to settlement
6. Liaise with any other professional if required
7. Some brokers will offer quarterly reviews just to make sure the loan you have is still the most suitable – your needs will change and therefore your loan needs will also change.
8. Some brokers may also charge fees for additional services, or extras that other brokers may not offer.

To me the most important advantage of using a mortgage broker is their ability to negotiate the best deal with the banks for you. You cannot get this specialist advice from searching the internet, or  certainly not banking staff.

You need to find an advisor that understands what you are trying to achieve and build a long term relationship with them. Choose a broker from the New Zealand Mortgage Brokers Association (NZMBA).

My recommendation is to try Jon Purdey at Edge Mortgages, he’s very professional, and is great at negotiating with the banks, on 021 979 335 or 09 448 5428 Connect Mortgages, who helped with this blog, or try Harcourts own mortgage broker Mortgage Express.

You might need a valuation for a property when you’re  thinking of buying or selling, but there are other reasons to get your property valued, for example, you may wish to borrow money or insure your property and for this you’ll need a Current Market Valuation.  And your local council levies their rates based on the valuation of your property called a Rating Valuation (RV), up until a few years ago it was called the GV or Government Valuation. Occasionally there are disputes over property, for example matrimonial disputes, commercial disputes and other issues that require a valuation.

Let’s look at the GV or your rating valuation:

Council Rating Value

The RV (rating value) used to be called the GV (government valuation) and sometimes the QV (quotable value) and is legally required under the Rating Valuation Act 1998. It’s for calculating the city council rates and is done every three years. It is not a current market valuation, and often has little resemblance to the selling price of a property.

The Current Rating Valuation is calculated by Quotable Value Ltd, using computer models of both land and improvements. Usually, they don’t visit the property, and very rarely inspect the interior. The condition, maintenance and improvements to a home are not known unless reported through council records, and a building permit issued for improvements. The valuation has three parts:

Land Value: This is the probable price that would have been paid for the land at the date of valuation, and includes any development work that has been carried out. It’s calculated on a square metre basis, ie a larger section has a higher value than a smaller section, regardless of the fact that it may just be a single house site.

Capital Value: Assessment of probable price that would have been paid if it had been sold at the date of last valuation.

Value of Improvements: This is the difference between land value and capital value. It does not represent replacement cost, or reflect that a house is poorly or well maintained, or may have unresolved issues such as “leaky home” or lack of a Code Compliance Certificate.

Current Market Valuation

A registered valuer carries out a full inspection of your property, noting the condition of the property and the state of the maintenance, including the size of the home and any related buildings. Local knowledge of the area, including community amenities, is noted. An assessment of recent sales of similar properties is made and compared with the property to arrive at a valuation.

Most banks and lenders will require a current market valuation from a registered valuer if you are borrowing more than 80% of the value of your property. Sometimes that ratio can vary according to market changes and your personal situation.

What’s in a Current Market Valuation?

It should have:

A copy of the title

A description of the property

The current market value

A mortgage recommendation

A description of the locality and associated amenities

A report on recent sales in the area, including addresses, prices and descriptions

Valuers

Your valuer must be:

A member of the New Zealand Institute of Valuers and/or the Property Institute of New Zealand. I would recommend a local valuer, rather than a valuer from another part of Auckland or New Zealand. Valuers offer other services and you should ask if you require a Commercial Valuation or an Investment Valuation, or require mediation in the case of a dispute over the value of a property.

Here’s a couple to try:

Liam Lyons has been valuing property on the North Shore for as long as I can remember, is well respected and very helpful; call his office on 09 489 5329, or visit the Lyons and Co website. They are right in the heart of Takapuna in Anzac Street.

Prendos offers a wide range of services including  property valuation, building and quantity surveying, remedial design and administration and dispute resolution.

Prendos is a leader in property advice and design remediation of defective buildings.  They provide the full range of property evaluation, building performance and condition and failure assessment.  Dispute resolution services include arbitration, adjudication, mediation and expert evidence from leaky buildings to property condition and lease disputes. You can contact Tony Carlyle on (09) 486 1973  (ext 718) or mobile: 021 482 320 or go to the Prendos website. Their office is in Barry’s Point Road.

Valuation of Rental Properties

You should be able to get a written assessment of potential rental returns from any property manager. They will look at what similar properties in the area are being rented for and take into account market trends. You’ll find Lizzie Simanke here at Harcourts Milford really helpful on 021 366 339 or Dennis Hopkins at North Shore Rentals Ltd. Again Dennis has been around longer than I have and that’s saying something! His contact number is 09 489 2651 or 021 929 171.