Revolving credit facilities are a large overdraft with a pre-determined credit limit or a line of credit and are offered by most banks. Banks have packaged these line of credit loans now as part of their home loan offerings and have given them various names.

These revolving credit accounts can be used successfully to reduce the amount of interest you pay over the life of your loan and therefore help you to repay your home loan sooner. 

You need to understand and set-up a revolving credit account properly to get the most benefit from this form of line of credit. To make a line of credit account like this work you need to be disciplined with your spending habits.

Often we hear horror stories from people who have set up a line of credit (revolving credit account) andit hasn't worked for them.

It is true that a well managed line of credit account can reduce your interest costs substantially, but it is equally true that an unmanaged line of credit account will not work for you.

Know How Line of Credit Accounts Work

Revolving credit accounts are a flexible, floating interest rate loan that is similar to an overdraft or a line of credit. 

There are many different product names and different features within the revolving credit product set, but the following are a list of characteristics which are common to most of the revolving credit facilities offered by the banks in New Zealand; 

Revolving credit is a line of credit or a transactional account.

The borrower may use or withdraw funds up to a pre-approved credit limit that applies to this line of credit.

The credit limit within the approved line of credit may be used repeatedly just like an overdraft. More importantly for many borrowers is that they have a pre-approved line of credit that they can use when required without needing to reapply or justify the requirement to the bank.

The borrower makes payments based only their loan limit and pays interest only on the amount they've actually used or withdrawn. The interest is typically calculated on the line of credit actually used – refered to as the daily balance.

The line of credit is a floating rate mortgage and therefore the borrower may repay the loan at their own pace or pay off in full at any time.

Most revolving credit account charge fees for both having the facility and for transactions. There are some banks and lenders who do not charge fees for these line of credit accounts and often your mortgage broker may be able to negotiate to either get no fees or a compensation package to offset any fees.

Some revolving credit products have reducing limits which amortise (reduce) like a standard mortgage.  

The Key Principles of Line of Credit Accounts

The over-riding principle for a line of credit account is that you must earn, or be likely to receive more than you spend, leaving you a monthly surplus. 

Assuming this is the case, then your monthly surplus becomes a repayment of loan principal, and this then reduces the principal owing on your line of credit mortgage and therefore the interest you are charged each month. 

The line of credit works to accelerate the repayment of your mortgage.

It is seldom recommended that a line of credit would form 100% of your home loan, but it can work extremely well to have a portion of your home loan set up as a line of credit with a realistic credit limit.

Some situations when a line of credit works well are;

• People who like the ability to overpay their mortgage when they can afford to.
• People who can afford to overpay their mortgage now but may want to be able to access the money in the future.
• People on a salary or wage who also earn bonus or commission income or have the ability to do overtime on either a regular or seasonal basis.
• People who are self employed with irregular income and expenses. 
• People in business who may need to be able to access funds (at times) to use within their business. Generally the interest rates you pay on a line of credit attached to your home loan is less than any business overdraft or business line of credit even though the banks are using the same security.
• People who want to be able to access the equity within their property to fund their retirement. If set up early enough then a line of credit can be a more affordable way of releasing equity from your home later in life.

Managing Your Line of Credit Home Loan Effectively

These simple steps are the easiest and most effective way to manage a line of credit account to ensure it works successfully.  It is well worth spending a little time setting things up at the start so you get the full benefit of the line of credit account; 

All your income should be paid directly into your line of credit (revolving credit) account. 

Set up direct debits from your line of credit account so that any accounts are paid on the due date but no sooner. You want to ensure you get any discounts for paying on time; however you also want to ensure your money remains in your line of credit account for as long as possible so that your interest is reduced.

If you are very disciplined you should use your credit card for most of your purchases where possible. The principal is that most credit cards offer a period of time where the money used is interest free to you – therefore you can leave your own money within your line of credit account and save your interest costs.

Banks love promoting the use of credit cards as they know many people will be unable to keep to paying off the credit card in full each month and therefore will end up paying interest to the bank for their credit card debt.

The use of credit cards in this manner can cause all sorts of issues and mortgage brokers should assess your existing spending habits and make any recommendation based on how you have proven to manage money in the past.

Credit cards are really just another form of line of credit but the banks will charge higher bank rates for credit card debt – typically over three times as much as the bank rate on your home loan.

It is no wonder the banks want you to have a credit card!  

Keep it Simple

Set and forget is the simplest approach to use with any home loan restructure and especially when a line of credit account is being used.

With your account well organised at the start, and direct debits set up so you never miss a payment or get charged interest, you can relax and let the system work for you. 

Follow these guidelines to get the best out of your home loan and you will reduce the interest paid on your home loan by using a line of credit in conjunction with a planned overall home loan struture. 

A line of credit account used properly will save you money. 

As we “seem” to be recovering from the World economic crisis and property downturn which started in 2007, we are again getting mixed messages from the “so called” experts.

Back in 2007 and 2008 we were told property values were far too high and they were going to “crash” by up to and over 25%. What actually happened was there were some parts of the property market that saw the values eroded; however this was limited to parts of the market such as apartments, overinflated rental properties, beachfront properties and the larger lifestyle blocks.

As we head towards a “Merry Christmas” the newspapers are again full of warnings of dire times ahead for the New Zealand property market – plus contrasting positive market reports.

So what are we expected to believe?

This week Barfoot & Thompson released data showing Auckland had a 23% increase in sales for November when compared to November last year and an increase of almost 19% on October. This is obviously a result that they are pleased with and it confirms the general feeling that properties are selling better now than they have for a long time.

Also this week Quotable Value (QV) reported nationwide residential property values in November were almost 2% higher than a year earlier and just 4% below the peaks of 2007. They also reported that Auckland prices were up over 3% year-on-year which is 0.6% above the peak of 2007. This means the average Auckland prices are now at the highest level they have ever been.

In stark contrast to what is actually being reported within the property market we read reports released this week from the Economist which claims that New Zealand properties are overvalued by 25%. They are telling us all to expect property values to decline - a property crash.

To back up the negative comments, many people would have recently received the new rateable valuations which have shown decreased property values. The rateable value is based on your property size and location, but are typically not an accurate reflection on the actual market value – but is still used by many buyers and lenders as a guideline.

Again we ask – what are we expected to believe?

When we purchased our home we were not driven by the potential for increases in value or decreases in value. We purchase our home because it suited our situation and we felt we purchased it at a fair market value for the time.

Like everyone’s properties, the value of our property was driven by the market conditions at the time. The price was set by the supply and demand at the time - what the willing seller (vendor) was willing to sell for and what the willing buyer (us) were willing to pay for the property. This method of setting values has not changed and is a fundamental rule within a free market economy.

The other influence which can have an effect is the lending criteria imposed by the banks. When the banks were lending to anyone with a pulse it encouraged huge inflation with house prices but when they tightened up the lending criteria the property market almost ground to a halt. The banks have now settled back into reasonable lending practises and therefore the ability for homeowners to borrow money has returned to normal (almost). If there is a normal anymore?

The third major influence is the amount of new homes being built. At this stage we know that building consents are at a historically very low number. This would mean that it is unlikely that we will see the market flooded with new property in the near future. The lack of supply should keep demand high for existing properties – it is a numbers game... supply and demand.

In summary, while people still desire a home of their own and the banks are happy to lend I cannot see the house prices in a city like Auckland “crashing” and instead my prediction would be house prises rising over the next 12-months. When I say “prediction” I use this word with the now standard 1000 word disclaimer – in other words don’t hold me to it!

What is your bank to you?

There are various thoughts and opinions when it comes to how people think of their banks.

Some people have been dealing with the same bank for many years and have always received the service that they had expected while others are never satisfied with the banks – plus there are many whom would sit somewhere in between.

One huge influence is how much you are deemed worth by the bank. Banks typically have a rating for their customers whereby those who have a certain level of business are treated differently to those who have very little business with them – that is they cannot earn the same amount of profit from a person (or business) that has little requirement for a bank.

Business to a bank may mean you have plenty of cash in the bank, you (or your business) transact consistency large amounts with the bank or that you owe the bank too much!

Banks are not often very good at selecting future potential with customers – they are very much reacting to the “now”. It is the same in both good times and bad; in good times the banks will lend you as much as you want while when things are not going so well they will be calling in the loans and generally making things difficult for you.

At the moment banks do not like self-employed people and especially if your income is erratic or you have just started or recently established your business. Bankers also have industries they love and others they hate and this is often based on the banks recent experience within that industry.

To make you dealings with the bankers survive the good times and the bad you need to prepare yourself while things are “good”. I have a few simple suggestions which will help you manage your banking relationships and while your bank may not always like these suggestions I do believe they make common sense and offer you better protection.

Always have a backstop – that is you should try and borrow a little more than you need or at least have a facility available to you. It is always easier to arrange this when things are going well rather than leaving it until you need the money when you risk the bank may say no.

Don’t put all your eggs in one basket – banks will tell you that you should place all your business with the one bank and therefore they can treat you better and your banking relationship will be easier. On the face of it this may sound plausible but if things don’t go to plan the banks can easily take control of all your finances. It is always recommended to have you banking spread between more than one bank – that is you may have your mortgage with one bank, your business with a separate bank and the investment property with another bank – you have control not the bank.

Don’t invest or arrange insurance through your bank – a bank will generally have one suite of banking products, one suite of investment products and one suite of insurance products. They will then try to make your situation fit the banks products. It is better to treat your bank as a supplier of banking products and select the bank that ahs the most suitable product at the time. You should also treat investment and insurance providers the same – that is select them on what they can offer you rather than letting them try to convince you that their product will be okay for you.

Select a good adviser – having a good adviser with an independent opinion can be very helpful and over time can help you enormously. The difficulty is finding an adviser who will truly work for you. Unfortunately most “so called” professional advisers will limit their advice to a small range of selected products and often all with the same company. They will tell you reasons for this or will often pretend they are independent; however in most cases advises are not working for you (their customer) but are working for themselves – to line their own pockets.

Dealing with your own financial affairs can be a daunting prospect and often this combined with the mis-trust of advisers may lead you to going to the bank directly even when you know you shouldn’t.

Let me reassure you that there are still some good advisers who are able to help you.

As mortgage advisers (brokers) we meet people all the time who want or need some tools to assist them with managing their money, their expenses and their debt.

Heaps of these people are already very organised and are looking for a smarter easier way to do this while heaps of others have their finances in a complete mess but have recognised the need to get themselves sorted out better and are really looking for an easy way to get started.

There have been numerous concepts circulated around over the last few years including the Government sponsored Sorted website which has various useful tools; however Kiwibank have now sponsored a new online management software known as Heaps which we believe is one of the simplest personal budgeting and cash management tools available and best of all it is FREE!

With any budgeting tools you need to establish your starting point (financial position today), set a budget, set goals and then monitor everything to ensure you stay on-track. If the budget set was not realistic then you need to change it to ensure it is realistic and achievable.

What really appealed about this software is it can automatically integrate with your Kiwibank accounts but also has the ability to input information from other bank accounts. Once set up, any transactions from your Kiwibank accounts will be automatically categorised into the correct expense (food, entertainment, bills etc) so there is minimal manual work for you to do – making it easy.

Heaps will help you understand your spending, manage your budget within your income and achieve your goals.

Kiwibank are offering Heaps to you free but they are using this free offer as a way to promote their own banking and mortgage products too – and fair enough.

If you would like to move your mortgage and banking to Kiwibank you should contact your local Mortgage Link adviser who can discuss your options and ensure you get everything set up to suit your personal situation.

Kiwibank consistently offer some of the lowest mortgage rates available, have low cost credit cards and accounts plus one of the best internet banking options. Kiwibank use Mortgage Link advisers as they are arguably New Zealand’s most respected mortgage advisers and have offices throughout the country.

Heaps is the new and FREE personal money management software available – CLICK HERE to check it out for yourself today.

At the end of last month ANZ chief executive Mike Smith signaled he would like to see both ANZ and National Bank customers able to use the banks as one bank citing that "at the moment we have two of everything, so that is clearly inefficient," Smith said.

This comes as no surprise to many mortgage brokers who had concerns the customer choices would be limited following the decision to allow ANZ to purchase The National Bank for $5.71 billion in 2003. Earlier this year the ANZ National Bank announced a management restructure in New Zealand to pull together its commercial and rural divisions into one operation and shed up to 15 management roles and 30 back office roles. The rural division had been run as a National bank arm.

In November 2010 the ANZ National Bank said it will move to a single computer system in a move that heightened speculation it may merge its ANZ and National Bank branch networks under a single brand; however ANZ National Bank's recently appointed chief executive David Hisco at that time denied the two brands would merge.

Until last month’s announcement the staff and industry observers had been watching with interest as for the past 8-years the banks had continued to show two separate shop fronts, even if a number of back office teams had been amalgamated. With the recent activity it now seems that the public, staff and regulatory people are being warmed up for the announcement of a merge.

To add further fuel to the merge debate, ANZ National Bank is about to review its use of the National brand, which includes the black horse and green colours which are still owned by UK banking group Lloyds. The agreement to use the brand was extended but is now due to run until the end of 2014. Smith said: "The branding is on the table and we're now discussing it, and we have to come to a decision fairly quickly because the brand we have, which is the horse, is not ours for very long. That belongs to Lloyds Bank, which is owned by the British government."

The problem for the New Zealand banking customer is the reducing level of choices now available – there is already a limited number of banks to choose from and even if ANZ and The National Bank share back office structures, they are still perceived as two separate banks. This means there are only five major full –service banks being ANZ National Bank, ASB Bank, BNZ, Kiwibank and Westpac. There are a number of new banks that have or are entering the market however it is not yet clear if any of these are going to be offering the full suite of banking services. 

Kiwibank started commenced operations in 2002 and while they now offer a full suite of banking for everyday Kiwi’s they are still some way off being able to provide the full suite of products for the business banking clients. This just goes to show how long it can take for a bank to introduce things and therefore we would be anticipating most new entrants to stay focused on a small niche market. Rabobank would be an example where they have remained focused on all stages of the food and agribusiness value chain.

I guess small minnows appear to have very little say in what influences the decisions of the large corporate banks, and they will probably try to steam down the path of a merger as it would make economic sense at least in the short-term. The corporate banks know that Kiwi’s are typically loyal to their banks so they can potentially upset quite a number of customers before it has any major impact to them. To back this up, last year the University of Auckland released a survey on “Customer Satisfaction and Loyalty” which concluded that 15% of New Zealanders would like to switch from their major bank, but in fact only 4% actually do.

While the choices continue to diminish for the mum’s and dad’s in New Zealand we can be thankful that we still do have a pretty good banking system and we still do have some choice – we can vote with our feet and support banks which we deem worthy of deducting fees from our accounts.

Following the OCR announcement last week and subsequent reductions to the floating interest rates of all major banks, Westpac have today announced a reduction to their fixed rate too. They are not huge reductions but every bit helps…

But the question remains – should you leave your mortgage on a floating rate or fix it now?

Firstly it is always good to quantify what you are actually paying – as an example, monthly repayments on a $300,000 mortgage on a 30-year term at Westpac’s Everyday (floating) rate of 5.60% would be $1,722, compared to $1,790 on a 1-years fixed rate (5.95%), $1,876 on a 2-year fixed rate (6.40%) and $2,118 on the 5-year fixed rate (7.60%).

Then consider your own situation – could you comfortably afford your mortgage repayments if they suddenly increased?

Fixing your mortgage is like having an insurance policy against any sudden interest rate rise. It is therefore fair that you would pay a small premium for this peace of mind but what you need to consider if you would be willing to pay the extra ‘say’ $68 per month to protect yourself for 1-year or $154 per month for 2-years. But what if interest rates suddenly jumped to ‘say’ 8.50% - your payments would jump to $2,307 monthly?

While we do not expect to see any significant interest rate rises this year, the World is a volatile place and therefore it cannot be ruled out. New Zealand is a small country and economically we are at risk of having a credit downgrading which would almost certainly force up interest rates.

So what do we suggest?

In most cases for reasonable size mortgages and on your own home we would suggest that you divide your mortgage up so that you have a portion on floating, a portion fixed for 1-year and a third portion fixed for 2-years.

This structure has helped many of our clients minimise the effects of interest rate rises, but it also means you do not get the full benefit of interest rate drops. It is all about managing the risk and with some planning (and encouragement) it can also help you to pay off your mortgage more quickly.

Before contacting your bank – give us a call and we can discuss a mortgage structure that may better suit your situation.

It costs nothing to call and it may give you some peace of mind and also save you money … we can even arrange any changes with your bank.

It has been confirmed – as predicted by most commentators the Official Cash Rate (OCR) has been reduced today from 3.00% back to a record low of 2.50% which to most of us with mortgages seems like good news … but is it really?

Firstly it is important to understand the reason behind the drop as it is not just due to the earthquake in Canterbury as you may be led to believe from reading mainstream media. The key factor driving this decision was the weak economy in the later part of 2010 which has continued into 2011 with both households and businesses focusing any surplus income on debt reduction rather than spending on consumption.

Cutting the OCR will have an impact on all New Zealanders in different ways;

• Homeowners with mortgages generally benefit the most – a 0.50% drop in interest rates effectively puts an extra $10 per week in our hands for every $100,000 of mortgage lending that we have. This may help us pay for the increased petrol prices; however if we are able to continue to pay the same mortgage repayments then it can help us to reduce our debt more quickly than we may have otherwise been able to do.
• Business owners with debt “may” benefit; however it often takes the banks a lot longer to pass on any interest cuts to business loans, overdrafts or other credit facilities.
• Investors with cash deposits – while those who are borrowing money get a positive benefit, conversely those of us who may have money on deposit with the banks get the negative with interest income slashed.  It may mean that people will start looking at other investment opportunities again such as non-bank deposits, the sharemarket and property investment etc.

As mentioned, the key reason for the drop in the OCR was to stimulate the economy but we believe the real risk is that those with debt will take the opportunity to repay debt (a good thing really…) and those who rely on interest income (the spenders) will have less money to spend. It could therefore have a negative effect on the economy…

And it was Kiwibank who were the first to drop their floating interest rate by 0.50% to 5.65% - followed by ASB (5.75%), ANZ/National (5.74%), BNZ (5.99%) and Westpac (6.24%). We have not yet seen any change to the fixed rates from the major banks – fixed term deposit rates are also on the decline with most banks revising these this morning.

If you really want to make a difference then you need to “spend money” – but rather than on consumption you should consider borrowing money at these low rates to invest in property, businesses or new plant and equipment etc where over time you can increase your income and help build the income for New Zealand.

And that’s where we come into it – if you want to borrow money then give us a call and we will help you do just that.

It’s easy to do, it ‘sort of’ makes sense and it has been promoted for a long time by banks – but does that make it right?

For as long as I care to remember, banks have been saying that the cheapest borrowed money is mortgage money secured on your home and therefore if you want to buy that new car or boat, then the best way to finance it is to “put it on the house” – add it to your mortgage.

There is certainly some logic to this way of thinking but there are also some warnings that you should be aware of which may make you think twice before speaking to your bank.

Here are a few key points to consider;

•  Most new mortgages are structured over the maximum term of up to 30-years - most people intend to pay the mortgage off more quickly.
• A used car might have a useful life of ‘say’ 5-years remaining – that is in 5-years it will be almost worthless and therefore you want to upgrade it.
• Therefore you need to be careful that your ‘car loan’ is paid off before the car becomes worthless and you are ready to replace your car – as you want to add the cost of the new car to your mortgage again.

All too often we see people who have used their mortgage to finance consumption and most often they do not even realise what they have done. Using this philosophy you will eventually borrow too much – more than you can afford to repay and then the only option left is to sell your home. And all for what – a new car that is now worthless?

We agree that mortgage finance is the cheapest and therefore should definitely be considered as the best option; however the way the debt is structured is critical so that you avoid falling into the trap of financing a lifestyle.

The most common structure we use is where we set up a separate mortgage account (with your bank) which becomes your defacto hire purchase account – that is you use this instead of any hire purchase agreements so that (1) you remain on the lower home loan interest rates, (2) you have an predetermined limit of overall borrowing that you have calculated as being affordable, and (3) you have some flexibility with repayments.

The key is to pay off this loan in the same manner that you would pay off a hire purchase – ie: set up your repayments so that the item you have purchased (car, boat, bed, computer etc) is paid off within a suitable timeframe and within your budget.

This way once one item has been repaid you are able to use the same facility for your next purchase etc etc…

Self-discipline is the key to this method working for you and we suggest that don’t do it if you know in yourself that you will not keep to a strict repayment plan. If you are unsure how to go about setting this up and/or do not fully understand the concept then we are happy to go through this with you.

It has worked for a huge number of our clients – but not all…

The 14^th February is Valentine’s Day – a day when we acknowledge those special whom we love. As well as our partners there are often other ‘things’ we love; however they typically do not get a special day – we love our cars, our boats, our bikes, our  big screens and our houses. I would have also mentioned washing machines and irons but this is a day of love and I don’t want to end up wearing them!

Looking at the things we love can often remind us of those things we hate – typically debt and insurances come close to the top of the list and they happen to be the financial products that we specialise in. I know there are a few people that would also add the neighbours dog, the ex-husband or ex-wife and at times the car, boat or bike would be added too.

Considering debt and insurance – they are most often a necessary evil however we need to consider why we have them and ask ourselves if we are confident that we have the best and most suitable options. Debts and insurances are often easy to sign up for and seem too difficult to change – but is this really the case, and what are the consequences of doing nothing?

Some points to consider when reviewing your debt; 

• How are you managing the repayments? If you find the repayments easy to manage then there may be an option to increase your payments or make a lump-sum repayment. It may often not seem worthwhile to pay a little extra but it can be amazing what impact an extra $20 per week will make to repaying a debt earlier – ie: Paying an extra $20 per week on a $200,000 mortgage at 6.15% would pay the mortgage off approximately 5-years earlier and save you over $40,000.  

Check it out on our website or email us a scenario and we can work it out for you;

Website: www.mortgagelinkwest.co.nz

Email: officewest@mortgagelink.co.nz

• Have you checked what each debt is costing you? With mortgage rates at current low rates it is often worth looking to refinance any more expensive debt;

ie: we recently refinanced a loan of $10,000  which was at an interest rate of 19.95%. Refinancing at mortgage interest rates of 6.15% we managed to reduce the repayments from $370 per month to $305 – a saving of $2.395 in interest costs – there is a lot you can do with $2,395 and if added to your mortgage as illustrated above you save even more. The key here is to ensure that you don’t refinance your debts into your mortgage and then extend the term for paying off the debt – wherever possible try keeping the loan term the same or accelerate the repayments to repay the debt more quickly.

• If your income varies throughout the year due to bonuses etc or if you are expecting to receive additional funds, then you should ensure your mortgage is structured to allow additional lump-sum repayments of the suitable size without incurring any penalties. Remember that most lenders (banks) would prefer you to pay your mortgage off over the longest possible time so that they can make more money from you therefore it is not a focus for them to show you how to pay-off your mortgage.
• Because a lender (bank) can offer the “best mortgage” for you to finance your home, it doesn’t mean that the same lender would automatically be able to offer the best mortgage for an investment property – yet most people automatically approach the same lender. Since the credit crisis many lenders have started assessing and treating mortgages on investment properties quite differently and often not as favorable as they would on a home loan. In most cases we would recommend keeping your home loan and any investment loans or business loans quite separate – it means you retain control rather than the lender.

Some points to consider when reviewing your insurance;

• If you are unsure of what you have covered and/or don’t understand what you have been sold then it is probably time to review your cover. You wouldn’t put up with a television that doesn’t work, so why would you put up with insurance cover that isn’t going to work properly for you?
• Insurance is designed to provide compensation for a financial loss as a result of the occurrence of a specific event. This means that in most cases you (1) need to be the victim of an insured event, and (2) there needs to be a financial loss.
• Often we see people who have taken out cover for events that are unlikely to cause them any financial loss and/or where they have already taken another specific cover  which would better suit – ie: Trauma Cover pays a lump-sum in the event of a Heart Attack, but an we would argue that if you are trying to cover the loss of income then an Income Protection Cover would be more suitable.
• The good thing with most insurance policies is that you can elect to change them at any time – you do not have to wait for a specific review date etc. A couple of key things to remember however are (1) never cancel a policy until you have a replacement or have decided you no longer require the cover, and (2) not all covers are created equal – you don’t want to make a choice on price alone.

A good adviser should be able to offer you more than just the “best price” at the time – they should be able to ensure you get the “best value for money” over the long-term and that way you will feel secure in your finances – instead of hating or ignoring them.

Contact us if you want a “good adviser”

Most economists have now stopped giving any predictions as the turmoil of the past few years has undermined their “so called” logical reasoning. As I am not an economist I am still able to put my thoughts in print; however as my crystal ball is away being serviced these are to be read as ‘thoughts’ not ‘predictions’.

I think it is fair to say that the past 3-years have tested us all and made us reconsider our spending habits and the way we invest and borrow. On the World stage we consider New Zealand has managed the recession better than most with modest reductions in house prices, a secure banking sector and a reasonably stable job market. There have been casualties with business failures, redundancies and reduced earnings causing financial hardship but many have managed to hang on by rearranging their finances and adjusting their spending etc.

So here are some of my thoughts to consider;

In 2010 New Zealand had two of the worst recent disasters which have dominated the media and people’s minds over the past few months – the Canterbury earthquake followed by Pike River Mine. These have both had dramatic effects on those involved both emotionally and financially but we have also seen the great “Kiwi spirit” and generosity. If there is a positive to that we have seen from these disasters it is that people accept that disasters can strike and they are reviewing their own plans including insurances

Australia is currently in the middle of a huge disaster with flooding throughout Queensland and now Victoria which is currently having a huge personal impact but there will be financial consequences (and opportunities) which are still to come.

It was only a couple of years ago when people were so concerned about the long-term outlook for Australia due to the lack of water and Brisbane purchased a water distillation plant which was to be the savior – I believe it is now a rusting heap of metal somewhere.

It has been reported that New Zealand has recovered well from the recession; however many small businesses and self-employed and still waiting for the recovery to flow though to more work and money in their pockets. It is still quite fragile out there and most financial commentators are being cautiously optimistic with any predictions of growth.

This year sees New Zealand hosting the Rugby World Cup which should provide a small boost to the economy but more importantly it should make Kiwi’s feel good when (not if!) we win.

Being election year typically provides another lift as the politicians do deals to entice voters; however I am not expecting to see anything significant being given this time as there is no money left to spend. I think most Kiwi’s accept this and therefore would not reward parties for giving “bribes” this time.

 Interest rates have been held at low levels for longer than most people had expected and again most commentators were not expecting to see any increases until June 2011 although ASB have now suggested rates may remain low until September.

Yesterday also saw an interesting move with Kiwibank reducing the 1-year fixed rate to 6.15% from 6.45% - a significant reduction. The questions now are which other banks react and will this be the start of an interest rate “war” between the banks

A word of caution though would be that rises could come if either (a) the economy sees a significant recovery, or (b) if New Zealand is deemed by the rest of the World as a higher risk economy to lend money to.

Along with the economy, the property market has been subdued for longer than expected. Typically we see an increase in sales and therefore prices during spring and early summer but this did not really happen with QV quoting

In November December and now January we have seen increased activity with more sales and more clients out in the market looking to buy.

Property ownership is still something that all Kiwis aspire to and I expect that demand for good medium priced housing will start to steadily increase over the year and therefore we will see increasing prices.

In summary, I think that 2011 will be a slightly better, more predictable and therefore easier year for many of us. There will no doubt be some issues that test our resilience as there always is and therefore we are encouraging people not to over-extend themselves and to have a ‘plan B.’

Let’s hope that 2011 is a positive year for us all – including the All Blacks.