[HN Gopher] New Zealand plunges into recessionary spiral
___________________________________________________________________
New Zealand plunges into recessionary spiral
Author : koyanisqatsi
Score : 70 points
Date : 2022-11-04 19:06 UTC (3 hours ago)
(HTM) web link (www.macrobusiness.com.au)
(TXT) w3m dump (www.macrobusiness.com.au)
| pessimizer wrote:
| What do all these goofy polls have to do with a "recessionary
| spiral?"
|
| The only data in this is at the end, and it is not particularly
| interesting. NZ homeowners will be affected by rising interest
| rates.
| jamesvnz wrote:
| That's a rather sensationalist headline. Written by an Australian
| looking at graphs, rather than having a feel for what's going on.
|
| I'm sure he's a capable economist, but based on what I see, New
| Zealand is not "plunging". There's definitely a slow down - but I
| think most businesses are expecting a relatively soft landing.
|
| I guess time will tell.
| plantain wrote:
| I'm not commenting if they're wrong in this case in particular,
| but Macrobusiness's business model is sensational/doomer
| headlines funnelling into their private newsletter.
|
| They may look prescient if you read the last years
| publications, but they well and truly live up to the joke
| "Economists have predicted nine of the last five recessions."
| SturgeonsLaw wrote:
| Macrobusiness is the Zero Hedge of Australia. They are
| permabears, often with a reasonable financial case for the
| claims they're making, but they definitely start from the
| premise that the sky is falling, then look for data that
| corroborates that perspective.
| flog wrote:
| Judging by my inability to get into any store at Westgate last
| weekend due to the crowds, I think we're still a while off
| "plunging". /anacdata
| billforsternz wrote:
| Similarly my anecdata is how hard it is to find a car park in
| the allegedly in decline Wellington CBD and then how
| difficult it is to find a restaurant that isn't overflowing
| with happy diners and consequently incapable of accommodating
| us.
| formerkrogemp wrote:
| As it's been explained to me, we're in a demand shock with
| more or less normal supply constrained by logistics problems.
| lostlogin wrote:
| If you skim headlines it's much as you say. Interest rates
| rising (but still around historic averages), falling house
| prices and high inflation.
|
| https://www.rnz.co.nz/topics/business-economy
| potatochup wrote:
| > falling house prices
|
| Good?
| tmnvix wrote:
| Overall, yes, very.
|
| For some not so much. Talking with my landlord the other
| week, they said that they regretted not selling the house
| last year when they moved. It's lost 15k every week this
| year on average (according to homes.co.nz estimates).
| That's almost 30%.
|
| For people like me, it's a good thing. Interest rates are
| higher, sure, but a smaller deposit is needed and for most
| people I know that have been looking to buy it's the
| raising of the deposit that has been the biggest hurdle.
| Grimburger wrote:
| Investments aren't meant to be risk free.
| lostlogin wrote:
| That's exactly it though. For many it's as much a home as
| an investment.
| john2x wrote:
| Good for the wealthy.
|
| Middle-class still can't buy because of stricter lending
| rules and increasing interest rates.
|
| Middle-class who FOMO'd in the last 2 years will see their
| interest rates double and even triple when they refinance
| in the next months. With inflation and cost of living rises
| recently, that bump up in their mortgage payments is really
| going to hurt.
|
| Meanwhile, those with the cash can just scoop up houses
| (if/when they want to).
|
| Silver lining is younger and future generations might not
| be completely and utterly f'd.
| lostlogin wrote:
| Yes. But there will be losers. Some of this I'm fine with
| but hurting first home buyers and those who need a home to
| live in is crap.
| hedora wrote:
| Figure 9 looks dire: 95% of mortgage (by total value, not count)
| are going to have their rates adjusted in the next three years;
| 56% in the next year.
|
| In the US, that'd definitely lead to a housing crisis worse than
| 2008. Is there something different about how houses are purchased
| in NZ?
| loeg wrote:
| > Is there something different about how houses are purchased
| in NZ?
|
| The US government subsidizes long term fixed-rate mortgages as
| a matter of policy. This is not true in most other countries,
| including, apparently, New Zealand.
| coliveira wrote:
| This is certainly bad, but if it will lead to a crisis like
| 2008 in the USA, depends on a number of factors. First, there
| was a lot of leverage and fraud in the US case. Then, there was
| lack of financial support for families that had no option other
| than default on their mortgages. The US government didn't
| anticipate the issues caused by ARMs and only dealt with the
| problem when it was already clear the total collapse of the
| mortgage industry.
| chrisco255 wrote:
| Did they even really do anything with ARMs? I thought they
| were just flushed out with all the foreclosures that happened
| after '08. And then they just fell out of favor.
| exhilaration wrote:
| I've read comments on Hacker News that adjustable rate
| mortgages are the rule rather than the exception in many
| countries (outside of the U.S.). Here's a comment saying that
| Canada ONLY does ARMs
| https://news.ycombinator.com/item?id=15185052 and another
| comment saying that they're very common in some European
| countries: https://news.ycombinator.com/item?id=30339845. I'm
| guessing this is how it is in New Zealand.
| mig39 wrote:
| Canada does both adjustable-rate and fixed-rate mortgages.
| Just that we tend to do it for shorter periods. Typically 5
| or 10 years.
|
| I have two fixed-rate mortgages with really low rates. They
| won't come up for renewal until 4 years from now. Then I'll
| have to choose whether to do another 5 years with the current
| rate, or convert over to an adjustable rate.
| subarctic wrote:
| Canada doesn't have the concept of fixed-rate mortgages
| like in the US though, which is where the rate is fixed for
| the entire life of the mortgage. What you are describing is
| an adjustable-rate mortgage with an initial 5 year fixed-
| rate term, which in the US would be called a 5/1 ARM.
| rufus_foreman wrote:
| In the US a mortgage with a rate that resets after 5 years
| would be considered an adjustable rate mortgage, although
| the rate would typically reset yearly after the initial 5
| years (a 5/1 ARM).
|
| A mortgage that ends after 5 years and needs to be renewed
| would be considered a balloon mortgage, and they are rare
| in the US. They are "non-qualified" mortgages which means
| the government sponsored entities won't buy them, so there
| is a limited secondary market and they have much higher
| rates.
|
| I don't think I would sleep great at night knowing that
| every 5 years I would need to either get a new mortgage
| loan or lose my house.
| robocat wrote:
| In New Zealand, all mortgages are approximately at a _floating_
| interest rate.
|
| You can lock in a rate for up to 5 years (with the majority
| choosing 1 or 2 years), but after that "fixed" period
| completes, you now renew your interest rate at whatever the
| current market is. Most mortgages are signed up for a term of
| decades (mine is 30 years, and I signed up at age 50), so
| although you might use "fixed" rates for a few years each, you
| end up with a stepwise approximation to the floating rate. My
| mortgage allows me to pay 20% more principal each month, which
| shortens to term to 20 years.
|
| You can renegotiate terms, and you can cancel a fixed 5 year
| rate early, but the bank charges a fee, and the fee depends on
| how valuable the current terms are to the bank (they cover any
| downside risk to them). If you change mortgage terms, and it
| turns out the bank is "in the money", they don't pay you (they
| just pocket the profit).
| AlgorithmicTime wrote:
| r00fus wrote:
| Here in the US we have ARMs (adjustable rate mortgages) -
| usually they are rated by (fixed period/stepping rate) - the
| most common being a 5/1 ARM = 5y fixed + adjustable rate
| reset every year.
|
| So is it the case that in NZ, if you refinance your mortgage,
| you typically get charged a significant fee?
| mdasen wrote:
| We do have ARMs in the US, but fixed mortgages are a lot
| more popular - presumably because they allow someone to
| know how much it's going to cost.
| mdasen wrote:
| Silly question, but how do you budget given floating interest
| rates?
|
| Let's say that you buy an $800,000 place at 3% interest with
| a 20% down-payment ($640,000 borrowed). Your payments are
| $2,698/mo. Fast-forward a couple years and you're now at 7.3%
| and your payments are up to $4,388/mo. That's a 63% increase
| in your housing budget. That's an extra $20,280/year in
| housing costs.
|
| Yes, rent can increase crazy amounts which makes budgeting
| hard as well and we've seen rent go up 20% from pre-pandemic
| levels in many markets (though that seems to be rapidly
| falling as the market changes). However, you're not committed
| to that rent. Yes, it might be bad to downsize to something
| smaller that you're renting or to a less desirable location,
| but it's theoretically possible. In this case, you now have
| to pay 63% more money without a possibility of alleviating
| that burden.
|
| As rates go up, the amount you can sell a property for likely
| goes down (since it's now a more expensive property). In the
| US, at least you can continue living there at your low
| interest rate and fixed monthly payment. In NZ, your $800,000
| place is now worth $700,000 and your payments have gone up
| 63% and you can't really sell it because you owe more than
| it's worth and you also can't afford the payments...?
|
| I feel like I might be missing something, but your answer
| might just be "yea, that's how it is here."
| Negitivefrags wrote:
| Yes. This is how you get wrecked in the housing market.
| This is because buying a house is taking a risk. The
| question is just who is taking it.
|
| In 2008 my mother had her equity completely wiped out due
| to the exact situation you describe. Underwater mortgage,
| unable to afford the interest, forced to sell at a loss,
| zero net worth at the end after paying off all her debt.
|
| On the other hand, we didn't suffer the 2008 banking crisis
| and overall the economy was basically fine with only a
| minor recession, mostly due to worldwide conditions.
| climb_stealth wrote:
| Yeah, that's how it is here. Part of the thinking is that
| everyone is in the same boat and the government couldn't
| possibly let everyone go to ruin.
|
| It's nuts. Talking about Australia though.
| SturgeonsLaw wrote:
| Your scenario desribes how it works in Australia (similar
| system to NZ). Almost all mortgages are variable rate, you
| can lock in a fixed rate for a few years but otherwise
| you're at the mercy of interest rates.
|
| Buyers are subject to strict lending criteria to determine
| whether they can afford $current_rates + $future_increases.
| This means a lot of people are locked out of owning
| housing.
|
| The system is benefiting the already wealthy and leaving
| others, particularly young people, out in the cold.
| robocat wrote:
| > The system is benefiting the already wealthy and
| leaving others, particularly young people, out in the
| cold.
|
| That is correct, but I think your cause and effect
| analysis is wrong.
|
| We have 5 million people bidding against each other on 2
| million households.
|
| People bid as much as they can on their home, so if
| lending becomes looser, home prices shift up. The long
| term affordability doesn't change much. There can be
| other dynamic effects in the short term, I am talking
| about long term stability.
|
| People bid to the limit of their affordability, so houses
| remain at the limit of affordability, regardless of the
| actual prices.
|
| The structural problem is that home prices are a zero-sum
| game where we collectively bid to the point we can
| individually only _just_ afford the interest payments.
| And we also screw the country because we are bidding on
| how much money we can give to Australian banks.
|
| Home prices follow the same distribution as income (I
| think), until you reach a minimum wall of a few hundred
| thousand, below which nothing is available.
|
| The problem of house prices is an effect of bidding, and
| I believe prices have almost nothing to do with land
| availability or the costs of building houses.
|
| We could build more houses, but wealthier people will
| just buy two or more. I would like to own a second home
| in town for my occasional use.
|
| What to do? I don't know. Keep increasing minimum wage so
| that 50% of people are in the lowest income bracket?
| Extra taxes on investment properties or empty vacation
| homes? Suggestions?
|
| Are our city council rates already a significant way
| towards a Georgist taxation system? I looked at a wealthy
| suburb in Christchurch, and they were paying 5x as much
| as I do on rates ($15k per annum for the house I looked
| at).
|
| Living in Christchurch, we had heaps of as-is houses that
| couldn't get a mortgage, and their prices reflect the
| cash price, which was _wayyyyyy_ lower than the same home
| would be with a mortgage. I bought a _perfectly_ good 3
| bedroom home for land-valuation + $5000. At least half
| the price, because a mortgage was unavailable (and market
| was slow, so amplification factor on price too).
| tmnvix wrote:
| > What to do?
|
| Make housing less attractive as an investment vehicle. In
| my opinion the best way to do this is with the tax system
| (which, in NZ, currently favours property investment to a
| large extent).
|
| Two proposals that are often discussed are a capital
| gains tax (CGT) and a land value tax (LVT). Personally I
| would prefer a LVT. A CGT would be an improvement on the
| current situation, but it would be a big impediment to
| freely moving to take up a new job or for family reasons.
| An LVT has the opposite problem of being a potential
| impediment to staying put if the value of your land
| increases relative to other areas. For an older person
| who is no longer working this could force them to find a
| new home but could be dealt with by deferring payments
| until sale or settlement of an estate.
| rr888 wrote:
| > "yea, that's how it is here."
|
| Its also how it is in the UK and most other countries.
| There is a benefit that the central bank can control the
| economy much better. When the fed raises rates most people
| dont directly notice, where with floating rates the
| majority of households have less money every month straight
| away.
| alistairSH wrote:
| That's wild. In the US, a fixed-rate 30 year is pretty
| common, particularly when rates were <4% - lock in that low
| rate for the duration. We currently have a 20 year. No
| prepayment penalty, no renegotiation. The only reason my
| monthly payment changes is changes to taxes/insurance (paid
| with mortgage, put into escrow to ensure those are kept
| current). I effectively have a housing cost that goes down
| over time due to inflation and salary increases.
|
| I suspect a rates go up, ARMs (adjustable rate mortgage)
| become more common, in the hopes that rates come down and the
| homeowner see that upside.
| [deleted]
| twelvechairs wrote:
| US has 30 year mortgages backed by government. New Zealand and
| Australia do not so the overwhelming number are either
| floating/variable or fixed for 1-5 years.
| onlyrealcuzzo wrote:
| The US and Belgium are the only countries in the world with a
| government subsidized 30-year fixed rate AFAIK.
| voisin wrote:
| How are they backed by government differently than say in
| Canada where CMHC backs most mortgages?
| bombcar wrote:
| https://www.freddiemac.com/about and friends buy mortgages
| that meet certain requirements (called "conforming" loans)
| and package and sell them to investors. Since they will buy
| 30 year fixed loans, banks are willing to sell them, and
| investors are willing to buy the subsequent bonds created
| out of them because they're (likely) almost as reliable as
| 30 year treasuries from the US government itself.
|
| If you try to get a 30 year fixed loan outside of the US
| mortgage market, it's hard to find with rates as low.
|
| CMHC may not buy fixed rate loans in the same way.
| jemmyw wrote:
| Mortgages in NZ are typically fixed for between 1 and 5 years,
| with most fixing around 3 years. So 95% of mortgages will
| always be rate adjusted in the next 3 years.
| voisin wrote:
| Same as Canada. I assumed it was market forces but no, it is
| regulated this way! Seems like a bizarre plan to make your
| populace _less_ resilient to rate fluctuations.
| michael1999 wrote:
| How do you mean it is regulated this way? RBC lists a
| 25-year fixed right now -
| https://www.rbcroyalbank.com/mortgages/mortgage-
| rates.html#p....
|
| It isn't competitive (9.75% vs 6.2% on a 5 year), but it's
| there.
| voisin wrote:
| Woah, that's strange. I just bought a house and the
| mortgage guy I was dealing with said anything more than 7
| years is prohibited in Canada unless you go to an
| unregulated B-lender. Clearly I stand corrected!
| bombcar wrote:
| The US weirdness of 30 year fixed-rate loans that the
| _customer_ can call at anytime and the bank can never call
| except for non-performance is substantially subsidized by
| the US Government.
|
| Freddie Mac and Fannie Mae or whatever they are/were take
| those mortgages and basically convert them into government
| bonds that are then sold out.
|
| Otherwise getting 2% for 30 years would be nearly
| impossible (and it IS impossible in many countries).
| Negitivefrags wrote:
| It makes the banking system more resilient to rate
| fluctuations..
| throwaway788 wrote:
| The banks are required to stress test those loans with somewhat
| stringent requirements. When the loans were granted they take
| the current retail interest and add around 3% and ensure that
| the loan recipient could still afford it. Last year there were
| stories in the NZ media around how banks were not writing loans
| because people were spending too much on Uber Eats etc. They
| were going over finances with a fine-toothed comb (there was a
| bit of backlash in the media, but turns out it was a good
| thing). NZ banks have quite a high capital reserve buffer
| requirement which was increased by the Reserve Bank of New
| Zealand a few years ago - with a lot of pushback from the banks
| at the time.
| vosper wrote:
| This is correct, and also wages are rising faster than
| inflation. Very very few households with mortgages are
| actually at risk of defaulting (so low the number is
| essentially zero), and both banks and households can sustain
| higher interest rates than we're seeing.
|
| Much more info (with numbers and charts) in Bernard Hickey's
| post from a few days ago.
|
| https://thekaka.substack.com/p/incomes-are-rising-faster-
| tha...
| abeppu wrote:
| As an American I was struck by the graph of mortgages by fixed
| term length. I guess I've always heard that US home buyers are
| constantly benefiting from policies propping up 30 year fixed
| mortgages, and I knew that other places this wasn't the norm. But
| it's surprising to me that a majority of mortgage debt in NZ is
| fixed for less than 1 year. Even in years that don't see rapid
| interest rate changes, this must make it very hard to plan.
| ztetranz wrote:
| That's true. As a kiwi in the US, I was surprised by how many
| mortgages here are fixed term for a long time. When I last
| bought a house in NZ about 30 years ago floating rate
| (potentially changing every month) was the norm and "lock in
| your rate for five years" was advertised as an option you could
| take.
|
| My American father-in-law who is a retired realestate /
| financial industry professional seemed to have trouble getting
| his head around that when I told him. Not only that long term
| fixed rates were not available but also when you're in a short
| term (5 year) fixed rate, you can't easier refinance if the
| general rates go down. That seemed normal to me at the time
| because it's a gamble for both parties. If I sign a contract to
| pay X% for the next five years then it doesn't seem like I
| should be able to change my mind part way through any more than
| the bank can renege on the deal. That said, I never suffered
| significantly so that's easy for me to say.
|
| Likewise for deposits. It seems a lot easier to break a CD
| early (forfeiting some interest) in the US than it is to break
| a term deposit (like a CD) in NZ.
| bombcar wrote:
| The US market is greatly formed by the Great Depression -
| before that both sides could "call" the mortgage at anytime,
| basically (you could pay it off anytime you wanted, and the
| bank could call you and say "pay us cash tomorrow"). But
| nobody ever really DID either of those except from normal
| business (moving, missing payments, foreclosure, etc).
|
| And then the 1929 market crash wiped out the banks so they
| called in all their assets (loans).
|
| And so now the US Government steps in and says "banks you
| can't do that" and the banks said "then screw lending" and
| the government said "we'll buy and resell the loans with our
| guarantee" and the banks said, "oh really hmmm".
|
| You can get ARMs for real estate in the US, and they may
| become more attractive as rates rise; the rates were so low
| it wasn't really worth it to even consider, but they exist -
| here are some:
| https://www.bankofamerica.com/mortgage/adjustable-rate-
| mortg...
|
| The average American holds their loan for something like 7-10
| years before either moving/selling or refinancing, so an ARM
| can be a worthy consideration. But you must plan around what
| it could do "worst case".
| rr888 wrote:
| The long term fixed term mortgage in the US rely on Govt
| regulation and the securitization of debt. In most countries
| when you get a mortgage its literally a loan from the bank, not
| sold on to bond holders.
|
| Floating rate makes sense, if inflation rises, rates rise and
| usually so the pay rises so you can afford to pay more. In the
| US I have fixed at ~2% for 15 years which is good for me but
| seems silly over such a long term.
| vosper wrote:
| ITT: Lots of people from overseas wondering how New Zealand's
| mortgage and housing market works.
|
| This post is wrong, we're not in a recessionary spiral.
| Households (and banks!) are overall doing fine. Unemployment is
| at record lows, wages are rising faster than inflation, non-
| performing (ie in default) mortgages are at 0.2% of all mortgages
| (lower than GFC), mortgages are stress-tested to higher levels
| than we're seeing. Banks are extremely healthy (making money hand
| over fist).
|
| Consumer confidence is low, but it's low in defiance of reality.
|
| For more see here: https://thekaka.substack.com/p/incomes-are-
| rising-faster-tha...
| jesuscript wrote:
| What are the chances the private sector wants to play up the
| possibility of recession to preempt government freebies?
|
| "Keep buying those mortgage backed loans", for example
|
| "Keep those interest rates near zero"
|
| What do they have at stake?
| damiankennedy wrote:
| It doesn't feel like a recession but something is wrong. Our "go
| hard, go early" approach to covid meant we avoided a lot of
| tragedy but the govt printed that money. Now we're having an
| inflation shock leading to an interest rate shock. The
| shrinkflation is insidious when the packaging hasn't changed. The
| thing is, unemployment is so low, it's like the whole country is
| running to stand still.
| jeffbee wrote:
| Their consumer sentiment is only at -25 for major household
| goods? In the U.S. it is -35!
|
| https://data.sca.isr.umich.edu/get-chart.php?y=2022&m=9&n=35...
| tenpies wrote:
| There are a couple of Western countries that have combined a
| decade of terrible housing policy, banking policy, immigration
| policy, and every other government lever you could imagine; in
| order to generate an absolutely generation-crushing property
| bubble.
|
| New Zealand, Canada, and Australia will all be catastrophic
| lessons in the future.
|
| So when you see -25 sentiment in housing by Kiwis, it's much
| more severe than -35 in the US, because over 50% of the Kiwi
| economy is based on housing and associated services:
| https://figure.nz/chart/WRpSmBftC60lEu2q
|
| Canada and Australia are similar stories.
|
| Canada is probably the worst in that it intentionally is using
| immigrants to try to prop its rental market and suppress wages.
| This works well if you are intent on starting a golden era for
| slumlords, but it's also going to absolutely demolish quality
| of life and send food/energy costs screaming.
|
| It's very likely we're at the apex of a golden era of
| incompetence in these three countries in particular, but the
| West broadly.
| jeffbee wrote:
| FWIW, _housing_ sentiment according to the same survey is at
| -52, near the lowest level ever recorded, -60 in November
| 1981, and the same level as July 1981.
| hn_throwaway_99 wrote:
| One clarification if you're not familiar with New Zealand
| banking. The article states:
|
| > Last week, Bank of New Zealand warned that "things could well
| and truly turn to custard" as the global economy is plunged into
| recession.
|
| I read that and thought "Holy hell, central bankers in the US are
| usually extremely measured in their comments, they would never
| say something like 'things could well and truly turn to
| custard'". I misunderstood, thinking that "Bank of New Zealand"
| is their central bank. It's just another big bank, not "The
| Reserve Bank of New Zealand", which is their actual central bank.
| soperj wrote:
| Prior to 2012, there was also the National Bank of New Zealand
| which was also just another retail bank. Extra confusion haha.
| yonaguska wrote:
| Let's be clear, the federal reserve does not belong to the USA,
| and is not beholden to any direct representation to the people
| of the United States.
|
| I'm not familiar with how the Reserve Bank of New Zealand
| operates, but if it's anything like our federal reserve, the
| country belongs to the bank, and not the other way around.
| matteotom wrote:
| The Fed is designed to be independent from the whims of any
| individual politician, but it still exists due to an act of
| congress, and could be changed at any time by congress
| passing a law and the president signing it. And if that
| can't/doesn't happen, it's because _congress_ doesn't
| represent the people of the United States.
| nobody9999 wrote:
| Edit: As was pointed out, I didn't read the comment I
| replied to in the best light.
|
| As such, I'm deleting the original text, since I can't
| delete this comment any more.
|
| My apologies.
| hn_throwaway_99 wrote:
| That is an extremely curious reading of the comment you
| are responding to, given that it appeared they were just
| arguing that if people _want_ to change the Fed, and it
| doesn 't happen, _then_ that would show Congress doesn 't
| represent the people of the US.
| coliveira wrote:
| > if that can't/doesn't happen, it's because _congress_
| doesn't represent the people of the United States.
|
| You're just saying the same thing with different words. If
| the Fed or the congress doesn't represent the people it
| doesn't make any difference to the elite class, who indeed
| own these two entities.
| idiotsecant wrote:
| The distinction is significant though, there mechanisms
| to limit the fed's power if it's necessary, even if those
| levers and dials are not being currently used.
| astrange wrote:
| The Fed is independent because things generally go terribly
| when it's not independent. The people who control fiscal
| policy don't do a good job of monetary policy.
|
| If this causes worse problems (which it may but hasn't yet)
| things will simply be changed again.
| prottog wrote:
| > the federal reserve does not belong to the USA
|
| Come now, that's legal fiction designed to maintain the
| independence of the Fed. Congress created the Federal Reserve
| System and could remove it or twist it to whatever shape it
| sees fit tomorrow if it wants.
|
| There's a good argument to be made that the Fed ran easy-
| money policies for too long in 2021 in order to secure Chair
| Powell's reappointment in early 2022; this gives you a clue
| as to who they are in fact beholden to, despite their nominal
| independence.
| recuter wrote:
| Clear as custard.
| happymellon wrote:
| Assuming you are American, do you also get confused with Bank
| of America, or US Bank?
|
| Most countries have a retail bank that uses the name of the
| country or region, even if they aren't the central bank.
| rich_sasha wrote:
| England, France, Spain, Germany and Italy have f"Bank of
| {country}" as central bank. I stopped looking after these 5.
| happymellon wrote:
| And you would also be wrong.
|
| The German central bank is The Deutsche Bundesbank,which
| literally means "German Federal Bank" not "Bank of
| Germany".
| Strom wrote:
| Interestingly they don't seem to translate their name in
| their English material, they just continue using the
| German name.
| hn_throwaway_99 wrote:
| Many central banks are named "Bank of <Country Name>", like
| Bank of England (for historical reasons not Bank of UK), Bank
| of Germany, Bank of France (Banque de France) or Bank of
| Spain (Banco de Espana). If we had a private "Bank of The
| United States", then yes, that would be confusing, but no
| official institutions are named "BlahBlah of America".
|
| Also, the fact that the official central bank is so close at
| "The Reserve Bank of New Zealand" makes it more confusing for
| those unfamiliar.
| WillPostForFood wrote:
| _no official institutions are named "BlahBlah of America"._
|
| The only one I can think of is Voice of America. Definitely
| none of the major departments or agencies.
| happymellon wrote:
| The German central bank is The Deutsche Bundesbank,which
| literally means "German Federal Bank" not "Bank of
| Germany".
| iggldiggl wrote:
| Also regarding the putative "Bank of Germany" - in German
| "Deutsche Bank" (literally "German Bank") sounds more
| natural than "Bank von Deutschland" (if you literally
| translate "Bank of Germany"), and there actually _is_ a
| "Deutsche Bank", but it is a private entity (and always
| has been).
| happymellon wrote:
| Indeed, which is why I found it very odd that the two
| people who tried to argue that it is common then used
| Germany.
| Dracophoenix wrote:
| Oddly enough, the originating bank that formed what is now
| known as Bank of America was founded under the name Bank of
| Italy. So it can get even more confusing.
| astrange wrote:
| "Central bankers are extremely measured in their comments" is
| usually true, but it's a funny thing to say about New Zealand,
| because the reason the US and other countries have a 2%
| inflation target is almost literally because a New Zealand
| central banker made it up off the top of his head on TV once.
|
| This works okayish but, you know, could be better. (Some more
| explanation at https://someunpleasant.substack.com/p/the-prime-
| directive.)
| lostlogin wrote:
| > Bank of New Zealand
|
| And here is the funny bit, it's Australian owned. If it's
| anything like the rest of the market which is dominated by
| Australian banks, it'll pay some old kiwiana type music when
| you are on hold and say 'Kia Ora' or similar at regular
| intervals. Kiwi as.
| shakna wrote:
| Similarly, the Commonwealth Bank of Australia sounds like a
| government bank, and in fact even began as one, but is
| actually privitised. They also happen to be the sole owners
| for New Zealand's ASB - So that one is also Australian!
| thecoppinger wrote:
| If I had a dollar for every time I've had to listen to Six60
| while on hold, I'd be rich enough to start a bank.
| mmazing wrote:
| Wow! That's a lot of variable rate or only temporarily fixed rate
| mortgages!
|
| I'm certainly no expert in all of this, how does that stack up
| with other countries data?
| loeg wrote:
| Most countries don't have long-term fixed-rate mortgages. The
| US does because the federal government subsidizes them as a
| matter of housing policy.
| strangattractor wrote:
| The UK s similar.
| zinckiwi wrote:
| In my experience the concept of a 30-year fixed mortgage is
| uniquely (or close to it) American. Certainly in NZ anything
| beyond a two-year fix is rare.
| ghaff wrote:
| Which, as an American, seems wild. How many people are
| prepared to have their mortgage go up 2x to 3x just a few
| years--which doesn't even require an increase to especially
| outrageous rates from historically low interest rates?
| bombcar wrote:
| It's somewhere between US fixed-loan buying and month-to-
| month renting. It can go up but you can plan for that,
| basically by buying less house than "the maximum".
| jemmyw wrote:
| Banks are supposed to stress test customers to that kind of
| rate. Not sure how successful that is. I know we thought
| about it and moved pretty far out in order to afford the
| home we wanted without stretching our budget to the limit.
| Most of our peers stretched themselves to the absolute
| limit they could afford.
| Tiktaalik wrote:
| Variable rates are bad in those rare years where rates
| spike upwards, but the data shows that in general, variable
| rate mortgages are more affordable than fixed rate
| mortgages (which are a premium), which is why they're
| pretty popular.
|
| The thing that makes them not painful in bad times is that
| often the payments stay fixed, and the extra interest is
| tacked onto the end (meaning that you are gaining more to
| pay). (you can get a mortgage where the payments do
| immediately change as the rate changes)
|
| That being said it is possible to hit the "trigger rate"
| where your fixed monthly payments are no longer even
| covering interest alone, and then the bank will give you a
| call to make your payments go up.
| ghaff wrote:
| (In the US), the thing with fixed rate mortgages is that
| they're predictable which has a lot of value too even if
| you could do better with ARM if things align. And if
| rates go down--not that that was likely over the past at
| least 10 or so years, you could always refinance to a
| lower rate. I did have a home equity line of credit for a
| while--which was variable--but fortunately during a
| pretty low interest rate period.
| dbetteridge wrote:
| Well it's not like you have a choice...
|
| Most banks will give 5 years fixed at maximum and the
| interest rates were always higher than variable.
|
| Most people signing for the variable rates didn't expect
| this sort of massive increase within a year, given its been
| fairly low for a decade.
| allannienhuis wrote:
| I suspect many homeowners with a bit of equity would adjust
| their ammortization period to keep their payments
| affordable, and then re-adjust it again if rates drop a few
| years later. When it's time to renew your mortgage you
| usually have quite a bit of flexibilty.
|
| The people that get hurt the most with increasing interest
| rates are new home buyers with high-ratio loans, with their
| amortization already at the maximum. There are definitely
| some people who get caught in that squeeze and are forced
| to downsize or right out of the market by those conditions.
| zinckiwi wrote:
| As another commenter said, no choice. That's just how it
| works. Conversely, we're confused why banks in the US are
| willing to do a 30-year fix in the first place. That's an
| awfully long time into an unknown future to commit to
| anything, especially in an industry so conservative and
| ruthless as banking.
| Waterluvian wrote:
| I'm sensing this tremendous tension and anxiety in Canada too.
| Hopefully our energy sector will buoy things a bit so they don't
| get too terrible.
| myth_drannon wrote:
| They just posted the job numbers for October and it was +100k,
| blew through the roof. All this doom and gloom is to push the
| central banks to calm down and stop raising the rates.
| lostlogin wrote:
| Is the energy sector mining, drilling, oil and gas? If that's
| the way out of financial strife, that's depressing.
| Tiktaalik wrote:
| Tech industry in bc employs more people than all the mining
| oil and gas combined.
|
| The importance of the traditional resource industries feels
| like an out of date meme leveraged for political reasons.
| It's not the future for Canada.
| fdsafdewe wrote:
| You'd be amazed at how many "traditional resources" it
| takes to manufacture CPUs and other semiconductors.
| soperj wrote:
| BC's biggest exports is still Coal, and then Lumber. I'm
| sure Natural gas will be added to that list shortly.
| lostlogin wrote:
| That may be true, but at a significant cost. Skilled
| labour contributing to GDP is rather more useful than
| trashing the place and making a quick dollar. Just
| comparing the dollars masks this.
| soperj wrote:
| We're still a resource extraction economy in Canada. If it's
| not oil & gas, it's timber, mining, water, fish, food. You
| look at every major export from any province in Canada and
| it's mostly resources. Ontario is cars, which I'm not sure is
| any better.
| Waterluvian wrote:
| All of that and more. I just mean, a buoy that rises with
| rising energy prices to lessen the blow of an energy crisis.
|
| Indeed, it's pretty !@#$ing awful that that's the condition.
| cgh wrote:
| I understand the hesitance to rely on oil and gas, but what's
| wrong with mining?
| Tiktaalik wrote:
| it's enormously destructive to animal habitats, can poison
| water supplies.
|
| https://thenarwhal.ca/for-decades-b-c-failed-to-address-
| sele...
| olliej wrote:
| This is a standard pro business publication that posts
| sensationalist headlines with regularity, and believes the only
| way an economy can function is by not having taxes and letting
| businesses do whatever they want whenever they want.
|
| With that background we can see that they will always want to
| be able to run headlines like this, whether they're right or
| wrong. So I wouldn't worry about things based solely on
| headlines from organizations like this, any more than I'd put
| all my trust in economic forecasts from "The Marx Community
| Paper" :D
|
| I'm similarly wary of banks own forecasts given their track
| record of being opposed to any economic policy that doesn't
| increase their own profit margin.
|
| Honestly I would kill for the big important government measures
| for inflation, etc to only account for say the 80-90yh
| percentile of tax residents.
| __turbobrew__ wrote:
| I (Canadian) had to call our mortgage advisor about something
| unrelated to the rate hikes, but they said people are losing it
| because their 30 year mortgage now has a 40+ amortization
| period due to the payments on the mortgage staying the same but
| the rates going way up. If rates don't stabilize it is going to
| be a bloodbath once peoples 5 year terms are up. You can easily
| see your monthly payments double.
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