Interest Rates
Setting a Construction Period
You can choose a construction period of up to 12 months. This allows you to increase or decrease your interest reserves, and ensures you have sufficient funds to complete the home. There is no disadvantage to completing your home sooner. Once completed, you will settle the NewBuild Plan Finance and maintain your permanent mortgage in the traditional manner.
Interest Rate through Construction
Your interest will be calculated only on the amounts progressively drawn down at the current floating rate. You may elect to pay full or partial interest payments - or no interest at all if you have sufficient funds set-aside in your interest reserve account. (See Reserve Accounts).
Benefit of Additional Home Inspections
To ensure correct amounts are being paid to your builder NewBuild Plan arranges trade qualified building inspectors to inspect your home. They provide a detailed list of work fully and partially completed, which is checked against the predetermined yet flexible payment schedule.
This monitoring process is also used to help identify potential structural issues before proceeding to the next building stage. While the lender relies on the builder and council inspectors to evaluate structural compliance, our inspectors also provide advice on quality of workmanship. They may recommend a "stop payment" if necessary until remedial work is completed.
Where are Interest Rates Going in 2010
Below is a communication from the Reserve Bank that refelects their view of the economy and what they may do with interest rates:NEWS RELEASE
Date 29 April 2010
Time EMBARGOED TO 9:00am
OCR unchanged at 2.5 percent
The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5 percent.
Reserve Bank Governor Alan Bollard said: "The New Zealand economy is recovering broadly as expected and growth is predicted to pick up further through 2010.
"Trading partner activity has recovered more quickly than we expected. Growth in Asia has been particularly strong. Consistent with this, export commodity prices have increased close to their 2008 peak. At the same time, risks to the global outlook remain elevated.
"Notwithstanding the impact of stronger than expected export earnings, New Zealand households remain cautious, with the housing market and household credit growth subdued. Similarly, business spending is weak and firms continue to reduce debt.
"On balance, we continue to expect the New Zealand economy to recover in line with or slightly faster than our March Statement projection. Annual CPI inflation, which has been close to 2 percent for the past year, is expected to track within the target range over the medium term.
"As previously indicated, we expect to begin removing policy stimulus over the coming months, provided the economy continues to evolve as projected.
"The increased wedge between the OCR and lending rates, as well as a steeply positive-sloped interest rate curve, is expected to make OCR increases more effective than in the past. Accordingly, these factors should reduce the extent to which the OCR will need to be increased relative to previous cycles."
Mike Hannah
Head of Communications (Reserve Bank of New Zealand)