Banks rolled out six-month payment holidays for borrowers affected covid-19 this week. Owner-occupiers, investors, and business owners can take a payment holiday on principal and interest payments, but their loans will accrue interest over the period.

The payment deferrals are part of a huge intervention by the Reserve Bank to prevent a financial catastrophe, as covid-19 takes a stranglehold on the New Zealand economy.

However, One concern i have expressed is that taking a payment holidays might work against clients obtaining financing in the future.

Banks have moved to allay those concerns.

Westpac says customers who are not in arrears will be marked with a 'payment not required' flag, which will be reported to credit agencies, but will not impact borrowers' ability to get new credit in the future.

Only borrowers who are in arrears before their payment holiday will be marked with a 'hardship' flag, a Westpac spokesman said.

BNZ also confirmed its payment holidays won't affect credit scores: "Other banks will build their credit models differently so I cant speak on their behalf, but if a customer does take a deferral, it doesn’t impact their internal credit rating for us."

ANZ echoed the same line: "A home loan repayment deferral alone won’t impact a customer’s credit rating. However, if they’ve already missed repayments for any reason, even if we later give them a repayment deferral, this may have impacted their credit rating."

A Kiwibank spokeswoman said payment holidays would not affect credit scores "if they apply due to covid-19".

Even though Mortgage holidays are a lost resort at least we can have some comfort that the banks are working hard to ensure that clients will not be negatively affected in the future.

If you are unsure or want to talk to me, please do get in touch.
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Ryan
021 242 3136

The Reserve Bank is now expected to cut the Official Cash Rate two more times this year to 1.0 percent by mid-November as the global economy slows and business confidence slides to 10-year lows.

But the jury is out on how much of it will translate through to lower mortgage rates, given banks are under pressure to lift their profits to get ready for higher capital requirements. There’s also a concern that banks won’t be able to pass on the rate cuts to term depositors. That’s because the banks now need to keep savers happy due to Reserve Bank funding rules designed to stop the banks going for cheap ‘hot’ 90-day funding overseas.

There are headwinds and tailwinds for the housing market and mortgage rates coming from all directions.

The Reserve Bank has changed its stance on interest rates and is now widely expected to cut the Official Cash Rate at least once or even twice this year, starting as soon as May 8.

Governor Adrian Orr changed the bank’s view on future interest rates from neutral to an easing bias last week, surprising some who had expected him to say again that the next move could be either up or down. Instead, he said global economic headwinds and poor business confidence meant the next move was more likely to be down.

​Financial markets pushed wholesale interest rates lower and by this week were expecting a more than 50 percent chance of a 25 basis point cut next month, and one more later in 2019. That would drag the Official Cash Rate to 1.25 percent. Cuts are also now expected in Australia, where the housing market there is in free-fall and dragging on consumer spending. 

Last week ‘The Lending Pad’ won Adviser Business of the Year for the Northern Region and came third in New Zealand. The team always focuses on professionalism, integrity and great outcomes for our clients and to be recognised in the industry as we have, is a wonderful testament to receive.  We wanted to share this with our customers because without you this wouldn’t have been possible. 

Thank you for your support.  Wishing you a wonderful 2019. 
It sure is a great start for The Lending Pad.

​Sometimes, what appears to be a massive change is actually more evolutionary than revolutionary.

The new Government came in last year with a hiss and a roar, banning foreign buyers, promising migration cuts, reversing tax cuts and arguing it had discovered massive infrastructure deficits that needed fixing. It announced big increases in the minimum wage and a families package that boosted low incomes substantially and pledged to reverse nine years of employment law changes.

​It also put its own choice in as Reserve Bank Governor and changed the foundation of monetary policy to a dual mandate that took employment into account as well as inflation. These all sound like massive changes, but now we have the first round of reporting milestones on both monetary and fiscal policy to assess just how much has changed. ​​The Reserve Bank published its first Monetary Policy Statement under new Governor Adrian Orr on May 10 and Finance Minister Grant Robertson unveiled his first full Budget on May 17.