Intro
Hello. I'm Bernard Hickey with the daily briefing from interest.co.nz...
Today, we'll look at ANZ National's latest results and some early signs that higher interest rates and a squeeze on disposable income is forcing some borrowers to default on their loan payments.
We'll also look at what's happening with mortgagee sales. There's quite a few going on at the moment and we've started an informal way of monitoring them.
And we'll quickly look at the New Zealand, which has jumped to a post-float high on strong investor demand for our amazingly high interest rates
Past Due Assets
But firstly news that ANZ National has reported strong profit growth and is growing its market share in mortgages and term deposits. But it is also starting to see what it calls a modest increase in borrowers who haven't paid their bills for more than 90 days.
ANZ National's so called past due assets rose 50% in the December quarter to NZ$154 million.
ANZ National's CEO Graham Hodges says there has been a pick up in the number of people still in arrears, but he says many "self cure" their situations within 120 says. So we'll wait another 3 months or so before worrying too much about it, but its clear higher interest rates and squeezed disposable income is having an effect.
Hodges also says ANZ National is being marginally more cautious about lending to people with poor documentation and to those with very high loan to value ratios. He also reckons it's dangerous to lend 100% to anyone now who can't afford the payments because any home buyer would be sitting on negative equity within a year or two given house prices are falling.
ANZ National is not alone in seeing some stress in the market. BNZ's past due assets more than doubled to NZ$81 million last year. But you've got to remember that ANZ National's past due assets equal 0.14% of assets, while BNZ's also equals 0.14% of assets. There's a long way to go before it's a problem for the banks.
Mortgagee Sales
Speaking of stress in the housing markets, we've decided to keep an eye on mortgagee sales. We're checking the property websites regularly for mortgagee sales and have created an index that combines the numbers of sales listed on trademe.co.nz and realestate.co.nz.
Currently there are around 105 properties subject to mortgagee sales in New Zealand right now. That's reasonably steady over the last three weeks. It's too early to discern any trends yet.
But we'll keep an eye on it, particularly now that house prices are falling and it will make sense for some buyers in negative equity situations to simply hand their keys back to the bank.
That's what people in England did in the early 1990s and that's what people are doing in the United States now.
Exchange Rate
Finally we take a quick look at the New Zealand dollar. It surged to a new post-float high of 81.3 US cents on Tuesday morning.
This is all about interest rate differentials. Currently our official cash rate is 8.25% and that doesn't look like changing any time soon because even though our economy is slowing, we still have an inflation problem.
Meanwhile, the United States Federal Reserve is about to cut its rates to 2.5%, even though it also has an inflation problem. The US Fed is desperate to avoid a financial markets meltdown. It is in the midst of a full blown crisis of confidence on credit markets that threatens to radiate out from wholesale markets into the wider economy.
The upshot of that is that our currency looks so much more attractive for international investors, who are feeling a little more relaxed on Tuesday morning about global market turmoil.
That's because Standard and Poors has just said it won't downgrade the world's biggest bond insurer MBIA from its AAA credit rating. This is important because some of the world's biggest banks were worried they would have to write off tens of billions of dollars from their loan books if the insurer for these bonds was downgraded.
We said a few weeks ago the Kiwi would remain supported around 80 cents because issuance of New Zealand dollar bonds to investors remained strong. That's still the case and don't expect a big fall any time soon.
I'm Bernard Hickey from interest.co.nz with the Daily Briefing. Catch you on Wednesday.
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Thank you ,Bernard .
I wonder if Standard and Poor`s were told to back off from MBIA -and if so would this be of any significance -or even a portent ?
bellpawt 3 years ago