Lock Down 2021 Ground Hog day, or is it?

In 2020, the first ever Covid-19 case was reported on the February 28, yet it took one month for the country to go into Level 4.

This year all it took was one possible Delta case and the nation went straight into Level 4 lockdown with no lead-in time at all.

Last year it took one month to go from one case to more than 100 cases in total, all before lockdown began.

This time around it's taken less than a week to get above 100 cases, despite the country being placed into an immediate Level 4 lockdown

Last time I was contacted by a number of very worried clients, this time not so much. I guess as we have been through this before, know what to expect and have adjusted our business and lifestyle to better handle lockdowns.

The Government has reintroduced various wage and business support schemes as before. Banks have not rushed to put in place the same support as last time. You can move your mortgage to interest only or extend the term of your mortgage but as yet banks have not approved any mortgage deferments.

In July I published a news letter saying that the future direction of interest rates was generally up, but the big unknown was the Delta Variant which could slow interest rate increases. I must have read the tea leaves very well, as soon as we went into lock down the Reserve Bank delayed the much-anticipated August increase in the OCR. When the economy is getting overheated the Reserve Bank uses an increase in the OCR to slow the economy, however a lock down will do exactly the same thing. The duration and extent of the lock down will determine how much the economy is affected. The OCR is reviewed 7 times a year with the next review on the 6th October. If Auckland is still in level 4 expect no change, otherwise expect an increase in the OCR.

With the current lock down, a change that will come into effect on the 1st October has mostly slipped under the radar! Under the current loan-to-value ratio (LVR) a bank can lend up to 20 percent of new bank lending to owner-occupiers at over 80 percent of the value of the property, that is to purchasers who have less than a 20 percent deposit. From the 1st October this ratio will drop to 10%. Note that new builds are exempt from this. The vast majority of buyers with less than a 20 percent deposit are first home buyers. With house prices being at all-time highs saving a 20 percent deposit is almost out of reach for most first home buyers. This will make getting onto the property ladder harder and harder. Family support is becoming increasingly common via the bank of “Mum and Dad” to help overcome these restrictions.

There are a number of ways mum and dad can help, but care is needed to determine the most appropriate and to avoid some of the pit falls. In my next newsletter I will dive into this.

Stay safe and well and if you have any concerns, please do not hesitate to contact me!