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20% deposit needed to buy a house from oct

20% deposit needed to buy a house from oct

Old Jul 22nd 2016, 8:45 am
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Smile Re: 20% deposit needed to buy a house from oct

Meeting reserve requirements using overseas funds . Also as a conduit for carry trade.
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Old Jul 22nd 2016, 3:04 pm
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Default Re: 20% deposit needed to buy a house from oct

Originally Posted by LoCarb View Post
To quote David Hisco:
<snip>

Thanks to the Bank of England (April 2014 statement) we now all know (or should by now) that banks don't on-lend funds, but create new money when they lend.

I will give him the benefit of doubt and assume he is referring to banks borrowing overseas to increase their reserves at the NZ Reserve Bank, not to directly fund Auckland housing.
I think that in terms of Quantitative Easing, the Bank of England just creates virtual money out of thin air (or computer programmes) and then uses this to buy bonds from banks and commercial businesses in the hope that the money will then trickle outwards to the consumers and other businesses in the form of loans, purchases etc.

This artificially boosts spending and makes the wheels of industry turn.

Of course the new money may just go to the Directors' accounts in the British Virgin Islands.

As far as I know since we left the Gold Standard there doesn't have to anything real to back the currency. The Government can just print more money and as long as other countries will accept this as something of value to be traded the nominal value stays up. I admit that I haven't quite grasped the logic of this, but then again if you ask too many questions the whole economy may just vanish in a puff of smoke reflected in mirrors.
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Old Jul 22nd 2016, 7:58 pm
  #438  
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Default Re: 20% deposit needed to buy a house from oct

Originally Posted by LittleGreyCat View Post
I admit that I haven't quite grasped the logic of this, but then again if you ask too many questions the whole economy may just vanish in a puff of smoke reflected in mirrors.
Ha! I like this analogy


Here's Bill Mitchell's required reading on QE:

Quantitative easing 101 | Bill Mitchell – billy blog
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Old Jul 22nd 2016, 8:49 pm
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Default Re: 20% deposit needed to buy a house from oct

Originally Posted by Charismatic View Post
Meeting reserve requirements using overseas funds . Also as a conduit for carry trade.
Arbitrage. Profits for Ozzie banks but causing high NZ$.

All a bit dodgy, but who needs banking regulations!
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Old Jul 26th 2016, 7:49 am
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Smile Re: 20% deposit needed to buy a house from oct

Kiwibanks economists have looked deeply into crystal balls and sifted through tea leaves: 3 cuts by early next year and so we get to 1.5%. Not a silly bet really, inflation needs to come up by nearly 0.6% just to get to the lowest level of target. The reserve bank has a wider purview than just housing and the rest of the economy is not that exciting right now.
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Old Aug 3rd 2016, 11:12 am
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Default Re: 20% deposit needed to buy a house from oct

Interesting, wage growth is at 0.4% last quarter...which means inflation adjusted wage growth is at 0%.

I'd expect to see bank rates drop in the next week or two, there might be room again for sub 4% rates in the 1 to 3 year space but banks will need to be nice to domestic depositors because the domestic savings rate is dropping and they need on-shore deposits to lend.

RBNZ has let the inflation rate fall outside the target band for so long that some people are calling for the target band to be adjusted. But then what's the point in a band if you are just going to adjust it to suit when you don't meet it? Although that's exactly what the UK, Canada and Sweden have done.


I guess the meta is that at the moment we are in a cycle of cutting towards 0% with OCR changes becoming less and less effective at driving growth. Eventually we get to 0% and accept deflation or we do some QE and try to get some capital flowing through the economy. Taking a step back it's about getting more spending power into peoples pockets either by making their dollar earned worth more (deflation) or putting more dollars of a lower value into pockets (likely through QE or charging negative rates.) This is quite a sticky mess because unemployment will likely edge up with deflation and QE tends to become less effective the more you use it. RBNZ need to keep some powder dry already being well into the second longest bull market on record .
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Old Aug 8th 2016, 7:57 am
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Smile Re: 20% deposit needed to buy a house from oct

So back a few years ago we decided we would let banks regulate their own capital requirements. As you've probably already guessed, banks where responsible and set prudent...o who am I kidding? They went mental and made sure depositors would be right on the hook come crunch time . Australia realized this and regulated so sucking capital out of their New Zealand subsidiaries leaving them in a particularly precarious position.

Commentators and shareholders are now urging banks to keep OCR cuts needed to restore their capital levels (so protecting depositors who are on the hook). The government is still arguing banks should pass any savings forwards.
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Old Aug 9th 2016, 12:27 am
  #443  
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Default Re: 20% deposit needed to buy a house from oct

Originally Posted by Charismatic View Post
So back a few years ago we decided we would let banks regulate their own capital requirements.
This isn't right. The RB sets capital requirements.

I think you are confusing it with bank reserves.
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Old Aug 9th 2016, 12:35 am
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Default Re: 20% deposit needed to buy a house from oct

Originally Posted by Charismatic View Post
... and they need on-shore deposits to lend.
As we now know (thanks to The Bank of England statement) banks don't lend out the deposits they receive.

Deposits are held as reserves. Banks can't lend out reserves.
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Old Aug 9th 2016, 12:53 am
  #445  
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Default Re: 20% deposit needed to buy a house from oct

[QUOTE=...... or we do some QE and try to get some capital flowing through the economy.[/QUOTE]

Haven't you noticed?
QE doesn't get capital flowing through the economy.

That's pretty obvious if you look at the countries that have used QE to try to stimulate their economies.
QE just adds to bank reserves. Banks can't lend out reserves, that's why they are called reserves.

Professor Bill Mitchell's link I posted above explains this.
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Old Aug 10th 2016, 9:55 am
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Smile Re: 20% deposit needed to buy a house from oct

RBNZ OCR tomorrow, most thinking is a 25bps cut (priced in) but there is a few opinions spread to 50bps as well.
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Old Aug 10th 2016, 7:19 pm
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Default Re: 20% deposit needed to buy a house from oct

Originally Posted by Charismatic View Post
RBNZ OCR tomorrow, most thinking is a 25bps cut (priced in) but there is a few opinions spread to 50bps as well.
The fx rates don't seem to reflect that
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Old Aug 10th 2016, 7:26 pm
  #448  
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Default Re: 20% deposit needed to buy a house from oct

Originally Posted by Charismatic View Post
RBNZ OCR tomorrow, most thinking is a 25bps cut (priced in) but there is a few opinions spread to 50bps as well.
I was just thinking, boomers are being blamed in part for the housing situation but right now it looks like the ones who invested in property were wise. Those who saved are now stuffed as their income falls with dropping interest rates.
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Old Aug 10th 2016, 8:54 pm
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Default Re: 20% deposit needed to buy a house from oct

Australia is having the same problem vis-a-vis, rate cuts not stimulating the economy:

Reserve Bank governor Glenn Stevens has used his farewell speech to implore the Turnbull government to take on more debt, saying that rate cuts alone can no longer "dial up the growth we need".

RBA governor Glenn Stevens' parting message to Turnbull: borrow and spend

And the answer:

"Try fiscal policy, stupid!"

https://www.facebook.com/green.moder...73690772714065

Last edited by LoCarb; Aug 10th 2016 at 9:04 pm.
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Old Aug 11th 2016, 5:12 am
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Default Re: 20% deposit needed to buy a house from oct

Any money put "at risk" has tended to do well since about '09 be that fixed assets like houses or elsewhere.



So 25bps cut but the weight of a 50bps cut expectation meant even as the guv' was telling us about an overvalued Kiwi it had jumped nearly 1% higher. We aren't likely to see inflation rise between productivity, wages and a fully valued NZD. Wholesales swap rates had priced in the cut already so only floating rates really changed (with the exception of Kiwibank who dropped 20bps from an market leading rate all the other cuts where very tame, not sure what Kiwibank thinks it can gain?) and a few deposit rates. It was a bit of a 'nothing' moment because it had been so widely forecast. More waiting to see what happens.
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