We had started 2011 quite strongly, commodity prices (read Dairy) were surging, mortgage approvals were on an upward trend breathing life into the real estate market and confidence was improving overall, not that it had yet flowed through to retailers.

However with the events of Christchurch & Japan hitting us all between the eyes our economy is taking a massive hit with an estimated $15 — $20 Billion of capital destroyed and needing to be replaced. That will stimulate economic growth but having this thrust upon us by having to replace assets lost is not the sort of growth we were looking for.

Thankfully, prudent management by government has seen us in the fortunate position of a strong balance sheet with relatively low levels of debt which allows us to lean on this position to stimulate the growth that is needed.

The Reserve Bank cut interest rates by a surprising and quite whopping 0.50% which with more than half of New Zealanders on a variable rate mortgage currently will be pleasantly felt in the pockets of all of these mortgage holders immediately. Surprisingly we say because while this was described as “an insurance measure” it is still in the face of an inflation rate that sits at the maximum of government preferred scale @ 4%, albeit no doubt we need help given the size of the challenges ahead.

Recover we will though, with Rugby World Cup set to pour millions into our economy and of the course the rebuild of Christchurch set to start a huge cashflow cycle not seen in this country for many a year.

With interest rates so low many a first house buyer is unsure as to what the best interest rate option is for them right now but we are leaning to sitting on the floating rate as these are the cheapest in the market in the mid 5% range and we can’t see any increase on the horizon in the immediate future. In fact we don’t believe that we will see any increases until the very back quarter of 2011 and maybe not until early 2012. Why pay 6.40% now we you can enjoy homeloans rates of around mid 5%?


About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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