KEY POINTS:
Whatever Reserve Bank Governor Allan Bollard has been saying to banks, it appears to be working, with fixed mortgage rates rising quickly.
Following the Reserve Bank's rate increase last month, Bollard told Parliament's finance and expenditure committee he was arranging meetings with the banks' chief executives "with some degree of urgency" to discuss their mortgage lending.
This forum debate has now closed. Here is a selection of your views on the topic.
David
Bollard is only doing his job with inadequate tools. He does have the tools to restrict bank lending and in 2008 these will become even stronger with Basel II. House prices are a consequence of excess liquidity fed by profligate Government spending and an inept bunch of politicians who do not understand that they do have the tools in existing law to control things. Also blame the Treasury etc for lack of advice to those same politicians.
Pravin
Just want to tell Mr Bollard rather than addressing the problem of fuming housing market prices at the source.He is playing being "bums on seat" trying to put pressure on public by asking banks to increase mortgage rates. Why cant he just front up and put his mind to work? Dont give band-aid solutions?
Raj Subramanian
Next items on agenda for the Government: 1)Pressurising businesses to increase the price of their goods and services, so that People will have lesser money to buy more houses, so that housing market will cool off.2)Increasing the construction cost for houses(already Aucklanders pay 150 per cent of what Aussies pay for building costs)by at least 15 per cent, so that the real cost of house matches trading pressures. )Another tax: green gas emission tax on households who use electricity, to contain inflation in the form of money left in people hands, that will ease surge in new mortgages
4)Send all MPs to their constituencies to go door to door to preach how to save by getting 4 to 5 per cent from Govt. bonds and become rich(is its so?). That is how Dr.Cullen saves Country's surpluses with a view to this country becoming richest in 300 years. 5)Govt. can even get into the boots of Banks and ask them to raise service charges, eftpos charges. There can be a Govt. suggestion to cut down the branches so that people will not go often to the bank for mortgages. This could be made into law if the banks do not abide. 6) Some Officials in United States, Australia and China say this country is going back from market economy to left-centrist economy. Helen Clark will address those issues as United Nations Secretary General with the new NZ Prime Minister in the years to come.Now there is no problem.
Tim
What country is it that we live in again? What happened to the free market economy? Why doesn't the goverment take over all business seeing they know how to run them best. Other countries used to model their economic reform on New Zealand. I can't see anyone locally or internationally endorsing this type of behaviour except perhaps a new communist state.
Paul
Yes most definitely! We have a crisis situation here, which is debt driven by banks with cheap money, fuelling the ridiculous house prices. The first home buyers must be allowed on the first rung of the ladder. If not, we will all end up fat cat retirees with nobody to sell to. Bollards only fault is he has been far too soft & should've been tougher earlier. If the new kids on the block think these current Interest Rates are high, they make me laugh! Do they realise that not too long ago my wife & I were servicing a home loan at 22 per cent. It is very easy to get in to debt but difficult to get out of and that is the crisis that is looming, when the worm turns.
John
I am a landlord. I shall simply pass on any costs to my tenants. I urge other landlords to do the same. If we all act together, it will not affect the ability to retain tenants. If that is what Bollard wants - well done. That will take money out of circulation (tenants money). But my preference is for Bollard to have nothing to do with interest rates. For goodness sake - just let market forces control the price of houses. They will just find their own level.
Kiwi Teetee
Raise the interest rates Bollard. Punish those people who spend excessively, with increasingly bigger houses, newer cars and more appliances and gadgets than you really need. Reward those who save, with higher income from interest earned and live a more frugal life, with minimal debt, if any. Only you Bollard can cure the NZ of it.
Michael
This is ridiculous. He hasn't been able to control things so he is pressurizing the banks to do it for him. The Reserve Bank has always acted retrospectively rather than being proactive. A major concern is the high kiwi dollar which is not helping our exporters and this is detrimental to the NZ economy. This should be the main concern of Bollard and the Reserve Bank, not how people are planning for their retirement by investment in property.The high interest rates (the highest in the OEC) is attracting all the foreign investment into the kiwi dollar and bonds which is counter productive to the earning capacity of our exporters. Because of our isolation from the rest of the world Bollard should be trying to make things as easy as possible for the exporters so as to gain maximum returns.
I do not own an export company but am damn sick and tired of the Reserve Bank and the Government not showing any foresight and knowledge in the fact that exports are a country's greatest source of income and needs to be cultivated. Hell it's not rocket science........but then again to those idiots in charge maybe it is.
Angela
It all partially part of this Governments excessive revenue gathering as higher interest payments mean higher tax revenue for them! So once again the "middle class" are punished as they try to improve their financial position, bring up their families and even buy their new homes! Local bodies bringing down subdivision, consent and ridiculous fees thus lowering the cost of new housing would result in prices stabilising on 2nd hand stock. This political manipulation is almost criminal and Bollard and co-conspirators should be hung. So as our interest rates go up and overseas funds flow into the country and the government coffers bulge. Our dollar remains high destroying our exporters.Next years election year so will reversing this current idiocy then stall our whole economy? Sack Bollard!
JP
It is currently almost impossible for any first home buyers to afford their own home in any major town. This should be a right of any hard working NZer to own their own home. The government is directly responsible for allowing this to happen. Raising interest rates has made the impossible even more impossible for first home buyers. There is no hope for first home buyers, why stay in NZ if you cant even afford a house? The Kiwi dream has been killed. Well done to the government.
Russ McGehan
Bollard should stop fiddling interest rates up. Families are spending more income needlessly on mortgages. Overseas investors are having a ball with the high Kiwi dollar, while Kiwi manufacturers struggle. We import much more than we manufacture, especially oil and high dollar value items, this is the main contributor to inflation. Separate housing inflation from the imported goods inflation and deal with these accordingly.
Martin
Where is the commerce commission? This sounds like secret backroom deals to ensure price fixing within the industry. Where does the government get off giving advice to banks on what their margins should be. I demand an inquiry followed by a prosecution of the Reserve bank governor for collusion.
John Schwartfeger
No. I do not think Bollard should influence bank margins unless the banks are going to increase interest paid on deposits. By getting the banks to raise interest rates, he has effectively given them a greater margin which means more profit which then adds to his problems he was complaining about a few weeks ago of so much capital going out of the country to foreign banks adding to the countries woes with the balance of payments. Bollards fixation on house costs is ridiculous. Why he and the Government do not take it out of the inflation index is plain dumb. They want us to invest in businesses. Ask all the Feltex shareholders or any of the many other big business failures that lost investors money if they agree. Housing is a supply and demand commodity which will reflect on prices on its own. If Joe Bloggs wants to use housing for his retirement then so be it. Building a portfolio through your working life to then utilise in retirement is probably safer than investing in businesses. Just as Brash proved and Bollard has not learnt yet, mucking around with interest rates only fuels profits for banks, impinges on the export and import sectors, and allows for the gap between the rich and the poor to grow all at the expense of the majority of home owners who only own one home anyway. Crazy Robin Hood practices in reverse.
Y Malone
I would hate to think that Mr Bollard would be encouraging banks to enter into some form of price-fixing. I thought that there was a law against that. Where is the healthy competition if all banks set their fixed interest rate at the same level? I would suggest that the government learn how to control the economy a little better through other means, rather than focusing all of their energy on home loans. There is a lot more to controlling a country's economy than that. And I can not believe he is asking people to invest in the sharemarket instead! Raising interest rates just attracts more foreign investment which pushes up the NZ dollar which again pushes up the interest rates. Not the poor kiwi who wants to buy himself a home. Does he want a nation of renters? Does he own his own home? If I had to make the choice I would choose property over a high risk sharemarket every time.
L Beard
I do not believe Bollard's pressure has anything to do with the Banks increasing interest rates. There is a trend worldwide. The major banks borrow money from overseas (a point so often missed). If they borrow it in bulk from Japan, they would be getting it for 2.0 -3.5 per cent then on sell to NZ "suckers". If they borrow from internal sources, they have to buy it much higher. Do the sums. Recently, I understand the Japanese increased by 0.5 per cent, so the banks have to buy it higher. Remember KiwiBank always states it borrows money from NZers (internally).
Jaspreet
While raising the interest rates will tend to put pressure on investors, at the same time it will further dampen the prospects of genuine first time home buyers which constitute over 60 per cent of the actual buyers. So, the solution lies somewhere else where the need is to provide new homes at affordable price through new property developments rather than looking at alternates, which will prove futile to achieve objectives.
Carl Wiekart
Why is it that Bollard wants to stop property going up? If we look at other assets like shares, we have no challenge with those going up but he is forcing us to not be able to afford anything to try and stop property going up. Is it because we seem to think we need everybody to own a home. What is the point if it does not go up in value? It would be like buying shares in a company that then got closed by the government because its share value climbed too high. Maybe he just wants to keep his job and that is his only motivation. Am I wrong but if we drop the interest rates, our dollar goes down which means exporters start benefiting. Imports in turn become more expensive which has a similar effect to putting up interest rates but at least our trade deficit would be sorted out and people would be more inclined to buy local products which in turn boosts our local economy. Also housing would become more affordable. Why is property so expensive well you only need to look at the cost of building for one. He should be talking to the councils which single-handedly have forced the price of property up at least 20 per cent in the past year. I think Bollard has no idea what the challenge is and that is why all he is doing is getting cross at the banks.
Neil
Raising interest rates is counter productive. It causes money to enter the country at cheap rates with the prospect of a high return to the overseas investor. This in turn puts increased pressure on the banks to lend, with reduced margins. Normally their margins are higher with lower rates. There are many factors that affect the housing market (actually it is a land market) and one of the major ones is immigration. By and large the current Government is responsible for rapid rises in property prices mostly through incompetent immigration policy and the Reserve Bank is exacerbating the situation as many scramble to "not be left behind" and keep up the buying pressure.
Paul
With the media constantly portraying the rising interest rates as bad news, the world has nearly forget that rising interest rates are good for some of us. Those of us who have no debt at all have a chance to earn a bit more from the higher term investment and savings account rate. All people who have taken on debt as a mortgage or in some other form have been aware that interest rates can always rise. I have no pity for those who have taken on too much risk. Although I do not own a house myself, I am happy to be flatting. Has no one else noticed that in some areas, the house prices have gone up, but due to an oversupply of rentals, the rent has gone down?
Rex
No way. With all these interest rate increases, as mentioned in your paper this morning, no wonder the rich are slowly getting richer... plus fuel price increases very well timed, just before Easter holidays. I say sack him.
Skpp
Sound policy. But that should not be all.
