I have just read an article that I think is very valid to share on my blog. It gives an insight of the state this country is in financially and its not a pretty picture.
Recently I have just helped my mom out because of a bad debt and bought half their property. During the process it has been interesting to note the banks requirements for the debt. I was recently talking to our Westpac loan lady and by all accounts there seem to be a fair few applications coming through there is just not many people with good enough credit to satisfy the bank that the loans were going to be re payed.
One other thing I note is that I got a letter from the bank on Friday stating that our interest rate has gone down .5% on the fixed portion of the loan however the repayments will stay the same. Meaning faster repayment which is great news. Anyway have a look at the article below. I think its one of the more honest accounts of where we are financially as a country and if you use common sense you should start to understand why its still going to be difficult in NZ for a few years to come
Writen by Benard HickeyIn years to come New Zealanders will look back on the winter of 2010 as the moment we finally realised the last decade of growth was a sham. It will be the moment when it dawns on home owners, small business people, retailers and real estate agents that our household debt has hit saturation point and we just can’t swallow any more. It will be when we realise that without that extra debt our economy doesn’t grow much, unless we can produce more useful goods and services for each hour that we work. Our productivity hasn’t grown much in the past decade and now we can’t disguise it any more by spending borrowed foreign money. The giant Ponzi scheme of adding more debt to buy more houses (or spend more on the same houses) then relying on capital gains to make up for it only works as long as some sucker is jumping in at the bottom with yet more debt. It is now clear that New Zealand has been in a twilight zone since the onset of the global financial crisis two years ago, wondering why everything seemed the same. Unemployment didn’t rise much, house prices dipped and then bounced, and GDP seemed to return mid last year. But this winter we discovered that the tide was going out, and in the past six weeks we have collectively discovered that the economy is naked without the extra debt. Here’s the latest: * Mortgage approvals hit a record non-holiday period low last week of 4867, or $601 million. Annual household debt growth has slumped to 2.5 per cent from over 10 per cent two years ago. * The housing market went deathly quiet in May and June, latest Real Estate Institute figures show. Turnover has dropped about 20 per cent from a year ago. It’s not just a winter thing. * Retail sales in May were again frustratingly weak. Core retail sales fell for the fourth month in six months and supermarket sales fell in May for the first time ever. * BNZ’s confidence survey shows a sharp decline among small business owners in particular as the real estate market goes into the doldrums. Many small business owners fund themselves from mortgages on their houses and when the values of those properties stop rising it’s hard to raise extra finance. One banker said of the market: “A few loan applications, but 80 per cent rejection generally due to risk too high. Generally small business wanting to borrow have left it too late, with balance sheets in poor state.” Banks are being more cautious as their funding becomes more expensive. Borrowers are more cautious because house prices have stopped rising and they realise interest rates are rising. The coup de grace was the Reserve Bank’s decision on June 10 to put up the OCR. The tide has gone out and our housing-dominated economy has been caught swimming in the buff. It needs to put on some togs in the form of a vibrant export industry and a productive sector. This will be a long, hard grind without the help of extra debt.