90 seconds at 9 am with BNZ

90 seconds at 9 am: Big mortgage concessions for 'red zone' homeowners; oil reserves tapped; food prices tackled; Saab sinks

24th Jun 11, 8:55am by David Chaston

David Chaston details the key news in 90 seconds at 9 am in association with Bank of New Zealand, with news that the Government's announcements on how it will deal with Christchurch's damaged land seems to have been well received, both locally, nationally, and by the insurance industry. The 'red zone' announcements yesterday will cost about $1.5 billion initially for the 5,100 homes involved, and they will then settle and receive the insurance payouts.

But there are another 10,000 homes in the 'orange zone' that will be dealt with in two or three months, and possibly an even greater number in the 'white zone' which need to be reassessed after the latest aftershock on June 13. And that includes all the hill suburbs and especially Sumner and Redcliffs. Could be a lot there.

ANZ and the National Bank have announced substantial concessions for homeowners in the 'red zone' who take the government offer and wish to buy another home. They are offering a 3.7% mortgage rate up to $500,000. Kiwibank made a similar offer. The repalcement home does not have to be in Christchurch. We expect most other banks to follow suit today or early next week.

Overseas, stock markets dropped sharply and the euro slid after oil prices tumbled and an unexpected jump in Americans claiming for unemployment benefits compounded an already gloomy outlook for the global economy. An international agreement to release oil stocks saw the oil price fall below US90/barrel at one stage. And the realisation that the Greek confidence vote did not really change anything for the euro didn't help either.

There was another agreement announced as well - the G20 is to set up a coordinated response team to tackle food prices. Market forces are under challenge.

And finally, we may be seeing the death throes of Swedish carmaker Saab. It has previously announced it can't pay its suppliers - now it says it can't pay its employees. It's probably the end for a famous brand.

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28 Comments

by Carpetbagger | 24th Jun 11, 9:02am 1308862972

Could Nick Clegg have a good model for our SOE sales?

http://www.bbc.co.uk/news/business-13892980

by Wolly | 24th Jun 11, 9:18am 1308863925

Greek BS default...banks to lose but the spin has a glosss on it...a turd with gloss still stinks.

QED you would be wise to plan for the default wave to gather pace as the credit is pulled from all the piigs.

That means credit will cost more. Get the picture. It's why Bill and his mates in Treasury grabbed all they could get.

Rates are set to rise on this and don't forget Bollard will have to move to catch up with inflation which is already yards ahead of him.

by cam | 24th Jun 11, 9:59am 1308866387

So I have got until the election to fix my mortgage rate long term... or will a default push them up before then?

by Muppet King | 24th Jun 11, 10:08am 1308866886

Fix for 5 years, or fix 50% and float 50%, thats actually probably a better option because it means that if the rates go up heavily only 50% of your mortgage is exposed. Basically halving risk of interest rate rises.

by foxysfolkfaced | 24th Jun 11, 11:05am 1308870300

depends on your circumstance - if you have spare capacity to pay more per week in the event of rising interest rates then i would float most if not all of my/your mortgage.

If however you will find yourself under water when/if rates were to rise a couple of % and you budget is already squeezed then you should fix a larger proportion of your mortgage for longer.

I have 50% of my mortgage due to come off a 2yr 6.09% in september and i will take up kiwibanks offset mortgage (floating) at 5.5% when that comes due

I don't see rates rising much if at all in the near future - sure the Greek issue may cause some initial shocks but I when that settles i don't see any growth prospects in the near term worldwide, longterm ..... who knows. some here will be saying "rates are set to rise" but they have been saying that since '09......

by Wolly | 24th Jun 11, 9:28am 1308864509

Needs must and all that......so what do you do when threatened with having your water flow reduced to a pint a minute or whatever in the fabulous socialist stronghold of Auckland....simple isn't it....flog a big tank and bung it in the ceiling or on the roof with the flow running 24/7......then swap some plastic feed pipe so the take off is there when you want it.....haha....oh and don't forget to route the rainfall via a filter into the tank or a bigger tank .....

by scarfie | 24th Jun 11, 9:51am 1308865862

What I wonder Wolly is how the hell they are going to restrict it in the first place. Are they really going to go to the trouble to install some sort of device to restrict the water flow? I can't see them throwing good money after bad, especially when someone enterprising is likely to work out how to disable what ever they try to do.

One of the other litlle tricks I have learned is that your waste water charge is based on a percentage of your total water usage. You can subvert that charge by installing a tank and using it to solely to flush the toilet, which is usually 30% or so of water use.

by David C | 24th Jun 11, 1:51pm 1308880278

Never underestimate the socialists ability to enter your home and install one of their many mind control devices.

by powerdownkiwi | 24th Jun 11, 5:11pm 1308892314

David C - I wouldn't have thought it was the 'socialists' who privatised water, nor did it sound like the 'socialists' pushing the point around the Council table.

Interesting spin.

by Billy | 24th Jun 11, 10:23am 1308867833

Nothing is free. Lower mortgage for them would mean the banks have to recover the shortfall from the rest of their customers somehow.

by ITYS | 24th Jun 11, 11:10am 1308870600

You could not be more correct if you tried. Can you imagine the board room in Melbourne prior to announcing their quarterly results...

"So Mr. Hisco, New Zealand's results are pretty piss-poor this quarter. You have one minute to explain yourself"

"Well, ummm, we errr, sort of, errr, gave away 1 billion of cheap credit. But we'll make it up next quarter, promise"

"xxxxxxxxxxx" [offensive personal comment removed - David Chaston]

"Nothing will get in the way of our quest to be a Super Regional Bank"

by Andrewj | 24th Jun 11, 11:20am 1308871249

The banks I think, would be very happy with the government guarantee of all their mortgages in the red zone. I think the banks have been bailed by the taxpayer and in return they gave a little sweetner. Also, the taxpayer has taken on the risk that the insurance companies may fail to pay. I think that this is a very generous offer by the taxpayer with borrowed money, compounding interest added onto the 'never never'.

by Hamish | 24th Jun 11, 3:01pm 1308884487

Leaky home owners up for any of this? Or are they still crunching numbers on net positive votes by electorate on that one?

p.s. I do have a lot of sympathy for Cantabrians and feel greatful to not be caught up in what they are having to go through!

by ITYS | 24th Jun 11, 11:31am 1308871918

Come on David, it was a play on words regarding the previous CEO of ANZ National!

by Gummy Bear Hero | 24th Jun 11, 1:08pm 1308877692

Pity for Saab that their HQ wasn't in Wellywood , NZ ....

... Jolly Kid would've bailed them out . ....... and Feel Goofy would've promised to have doubled that .......

by powerdownkiwi | 24th Jun 11, 5:14pm 1308892464

It's an anagram export opportunity, GBH.

Sell 'em baa's.

by Flux | 24th Jun 11, 1:21pm 1308878467

Maybe we should start calling bernard, Woody?

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10734004

chin up old boy...

by Wolly | 24th Jun 11, 1:34pm 1308879247

Oh dear oh deary me....the bureaucrats have made a balls of it......

"The private sector China Beachhead Advisory Board resigned en masse in a meeting at the New Zealand embassy in Beijing this week saying NZ Trade and Enterprise was undermining its work in helping Kiwi companies do business in China.

The resignation is likely to be an embarrassment for NZTE and the Government because growing trade with China under the free trade agreement is so highly prized by the Government".

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10734203

by David C | 24th Jun 11, 2:10pm 1308881400

Thats great news if the China Beachhead Board is anything like the US Beachhead Board,

A bunch of retards that pretty much guarantees failure for you. They claim to have "market connections" what they really have is old boys network of friends and kickbacks along with this sucking sound as they empty your wallet.

If your coming to the US just remember don't do a "Bendon" as my USA born wife so lovingly coined to describe the stupid marketing approach by Bendon when they first entered the US market. They couldn't afford to enter the NY or LA market so they entered the mid-west instead "BIG MISTAKE". NY and LA set the trend, they are the only market you can enter for fashion or beauty, anywhere else is auto death. Of course these markets will require LOTS and LOTS and LOTS of money.

The beachhead program doesn't care about that they just want your money and will tell you lame things about how successful you will be and how they will help you etc.

If don't understand the market you are trying to enter then go out there and learn it relying on someone else (Beachhead) is asking to be fleeced. There is no easy step you need to learn for yourself, this applies just as well in the US as it does in China or anyway else.

In short that news Wolly is wonderfull now close down the rest of the Beachhead programs.

by David C | 24th Jun 11, 1:56pm 1308880560

Is there nothing the national government wont bail out.

New Zealanders would be smart to watch Greece considering New Zealand is the up and coming PIIG of the pacific.

I think John Keys New York Bank connections are the only thing keeping the country a float.

Once he's gone how is Labour under Phil Goff going to keep the cheap easy credit flowing??

by Matt in Auck | 24th Jun 11, 2:09pm 1308881348

they aren't bailing DOC out - 100 jobs to go:

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10734218

cumulatively there have been a lot of job losses in the last 2 weeks

recovery?

(PS Tony Alexander does a nice job in his commentary today with some spin on the net migration figures by bringing up the old housing shortage argument )

by james_chch | 24th Jun 11, 4:00pm 1308888020

"There was another agreement announced as well - the G20 is to set up a coordinated response team to tackle food prices."

But since they don't seem to be looking at money printing, competitive currency devaluation, or artificially low interest rates leading to rampant speculation, they aren't likely to get to the root of the problem.

by steven | 24th Jun 11, 4:25pm 1308889508

hehehehe.....how cynical....but correct.....just why the developing world will accept such a white wash I dont know...The developed world is desperate not to fall into a depression....every Pollie wont stand a blind dog's chance of getting re-elected...so nothing real will happen. The main root cause of course is lack of supply, if you have plenty of output there is nothing for the speculators to push against.......Meanwhile to stop a depression, cheap interest rates and QE'ing will continue....

Otherwise the response teams purpose is to find a scapegoat or if not possible, take a long time in not finding a solution....

Nixon found that he wasnt going to get re-elected as long as the price of food remained on the political agenda, he got is taken off by flooding in crap like fructose as a filler etc to make food cheap.....so its hardly surprising. We will probably find that the answer will be the US food industry will start to ship fructose enmass to anywhere they can, they are pretty despeate to sell more....just look at how much is popping up in NZ processed food......

regards

by james_chch | 24th Jun 11, 4:55pm 1308891316

"just why the developing world will accept such a white wash I dont know"

It won't accept it, that's the problem. It looks like this is part of the reason for the revolutions in Africa and the Middle East. Food price inflation in the developing world leads to severe hardship and social unrest rapidly.

"The main root cause of course is lack of supply..."

I think looking at supply is missing the point. The additional demand from speculative money isn't real or sustainable, there aren't extra mouths to feed or extra people to house, or extra businesses to invest in. You don't need additional supply, you need to fix the artificial bubble in demand. Eg, preceding the 1929 crash, some commentators were suggesting there was a 'shortage of stocks' which was causing the problem. But now that just looks daft, they simply didn't see they were in a bubble.

by Andrewj | 24th Jun 11, 4:25pm 1308889503

Pressure on Greece escalates as EU leaders meet to avert crisis Greece's finance minister said he had agreed changes to a five-year austerity package with EU-IMF negotiators, as European leaders gathered in Brussels for their own crisis summit. http://www.telegraph.co.uk/finance/financialcrisis/8595285/Pressure-on-…

jonlivesey Yesterday 08:47 PM Two years ago, as Lehman and Citi were melting down, I used to say on AEP's blog that the thing we really ought to look out for was the "Second" Banking Crisis.

As we found in the Thirties, a first Banking crisis is pretty dramatic, but it also has a delayed knock-on effect. As Banks dig themselves out of the initial disaster, they rush to raise cash, and in the process they begin to sell a lot of less-liquid assets. Selling those depresses their prices, and that impacts the balance sheets of weaker Banks. And there is always a "weakest" Bank, so a year or so later you get a new wave of Banking problems.

And this is pretty much where we are today. We aren't saving Greece. Greece is just an excuse to save the Banks.

What's really going on today is that Greece will default, its debt will go to 20 cents on the Dollar, so the Banks have to get rid of it right now, before they become insolvent themselves.

And that is how "Second" Banking crises work. moraymint Yesterday 08:56 PM

9 people Like many others, I always assumed (knew?) that the financial-crisis-that-never-was in 2007/08 (the ATMs continued to deliver cash ... just) would eventually become the financial crisis.

The financial crisis is now imminent. Only this time, there will be no kicking the can down the road. This time, the financial crisis will be for real.

God only knows how this is going to shape up in terms of its impact on the lives of millions of ordinary people. My gut feel is that widespread, medium- to long-term misery now lies dead ahead for one hell of a lot of families.

Moreover, many/most of those families will not know what's hit them. It's like what happens when one goes bankrupt: it happens slowly; then all at once.

The Weimar era could be the historic analogy perhaps? Or maybe the sum of Weimar and The Great Depression together in terms of the socio-economic catastrophe that could now be wrought. Who knows?

by steven | 24th Jun 11, 4:34pm 1308890056

I agree....but somehow kicking the can gets done....but its a shorter and shorter distance...so you never know we might see another 6 maybe 12 months....

"Maybe the sum of Weimar and The Great Depression" I think I need to study the Long Depression....I think its going to be a lot worse than the Great Depression and from my very limited knowledge of the Long Depression even worse than that. Nicole Foss says this time, 100 years....thats the longest projection ive seen...but no one Ive seen that I'd think of as competant says less than 20 years....which will see me out I would think :/

regards

by scarfie | 24th Jun 11, 5:29pm 1308893379

I think yours and AndrewJ's posts sum up what I have read about the 30's depression and the parallel to today.

by Matt in Auck | 24th Jun 11, 7:18pm 1308899925

did anyone else read the very bullish cover story of the NBR today?

It read suspiciously like economy morale boosting propaganda to me