he New Zealand Bankers’ Association revealed today that the number of mortgagee sales was less than 0.2% of the total number of mortgages held by New Zealanders.
In 2011 there were 2263 mortgagee sales, compared to over 1.2 million mortgages. “This is a tiny fraction of total mortgage numbers,” said New Zealand Bankers’ Association chief executive Kirk Hope.
While there were five more mortgagee sales across the country in the first quarter of 2012 compared to the previous peak first quarter of 2010, mortgagee sales have actually declined year on year from 3024 in 2009 to 2263 in 2011.
“It’s important to allay any concerns with a few facts. There is no wholesale move to sell people out of their homes.
“Banks work very hard with customers who find themselves in financial difficulty. People who are having trouble should speak to their bank as soon as possible.
“Banks are responsible lenders. Affordability is something all banks consider when making credit decisions. They ask relevant questions about your circumstances and the possibility of any change to those circumstances. It’s in your interests to be up front with banks so they can best help you meet your needs,” said Hope.
“The benefits to already responsible participants are not at all evident compared to the costs they are being asked to shoulder,” Hope said. While banks could pose a greater structural risk to the economy, Hope said the prudential risks of the sector were already being managed by the Reserve Bank. “At a structural level we’re talking about well regulated entities paying for the regulation of poorly run, failed finance companies.”
New Zealand Bankers’ Association chief executive Kirk Hope said it had no issue with an industry contribution to FMA costs but the levy was disproportionate to the benefits received.
The New Zealand Bankers’ Association today expressed disappointment at the government’s announcement on the way it intends to levy the financial sector to fund the Financial Markets Authority.
“Banks are well-regulated responsible lenders operating at the top end of the market.
“The levies should better reflect the costs and benefits where they actually fall,” said New Zealand Bankers’ Association chief executive Kirk Hope.
“The FMA has an important job to do to crack down on the irresponsible end of the market. The benefits to already responsible participants are not at all evident compared to the costs they are being asked to shoulder,” added Hope.
While homeowners are jumping up and down with excitement over the low mortgage rates, savers aren’t having so much fun. “Balancing the needs and aspirations of borrowers and depositors, within the context of global uncertainty and a very competitive market, provides plenty of challenges for our banks,” Hope says.
Australian and New Zealand Productivity Commissions
Ministry of Consumer Affairs
Prudent management of the public purse is essential to keeping down the cost of credit said the New Zealand Bankers’ Association today in response to Budget 2012.
The Association supported moves to ensure borrowing costs for the government, householders and business owners do not increase unnecessarily. Initiatives that kept the NZ dollar at a realistic value were also important. A lower dollar made New Zealand more globally competitive and supported exports, including the important agricultural sector.
“Balancing the books and moving back to surplus will help our sovereign credit rating, which in turn will keep interest rates down for New Zealand households,” said New Zealand Bankers’ Association chief executive Kirk Hope.
“The credit rating agencies are paying close attention to us. If our credit rating goes down, our interest rates go up. A credit rating downgrade makes us look like a riskier bet to the funders, so it costs us more to source funds.
“The government is in line with households who are paying down their debt. It’s about living within our means. This responsible approach will keep us in good stead with the credit rating agencies.”
The Association was disappointed the Budget did not include more initiatives to lift New Zealand savings.
“We need some good policy thinking around how to improve our savings levels. This is important as it will reduce our reliance on foreign borrowing and provide us with a wider range of options and opportunities for future economic growth,” said Hope.
Bank lobby group, the New Zealand Banker’s Association (NZBA), says cuts in fixed interest rates highlight the level of “intense competition” in the New Zealand banking sector.
Recent cuts in fixed interest rates highlight the level of intense competition in the New Zealand banking sector. This is good news for borrowers, but will impact on returns for bank depositors.
Interest rates are at historically low levels. This is due to a drop in wholesale interest rates as a result of ongoing uncertainty in the global economy, driven largely by volatility in Europe. “Consumers are getting the benefit of this window of opportunity,” said New Zealand Bankers’ Association chief executive Kirk Hope.
“On the flipside it’s important to remember that cuts in lending rates also mean a decrease in savings interest rates. This will affect depositors who rely on the interest returns their investments earn. At a national level, this could impact on our private savings which have increased through the economic recovery.
“Balancing the needs and aspirations of borrowers and depositors, within the context of global uncertainty and a very competitive market, provides plenty of challenges for our banks. Domestic deposits are needed to ensure ongoing lending, which is vital for economic growth.
“Added to those challenges are increased regulatory demands such as the Reserve Bank’s core funding ratio and higher Basel III capital standards which make bank profitability even more important,” said Hope.
In its May 2012 Financial Stability Report, the Reserve Bank of New Zealand noted the banks were performing well, and that competition was set to increase as banks respond to lower credit demand. This will likely result in downward pressure on bank net interest margins, which are already lower than pre-global financial crisis levels.
“Banks need to retain an interest margin to continue operating and investing in New Zealand. They are major businesses which make a huge direct contribution to our economy,” said Hope.
In 2011 the New Zealand banking industry’s operating expenses totalled over $4 billion. This includes paying New Zealand businesses for goods and services, sponsorships, contributions to community and voluntary programmes, and financial literacy initiatives. It also includes salaries paid to over 25,000 people who are employed by banks in New Zealand.