In his recent New Zealand Listener article, “What to watch out for in 2010”, Gareth Morgan writes “…Property is the major business activity that characterizes our economy…” However, Morgan points out New Zealanders’ … “obsession with property involves people … bidding against each other for the same stock of houses (which) might result in a transfer of wealth but doesn’t actually generate income and jobs in a sustainable way.”

The question is what effect does this eggs in one basket approach to investment have on our national economy?

According to Morgan there are two far reaching effects. Firstly, if most of New Zealanders’capital is tied up in mortgages they are not investing “in the production of goods and services for sale overseas” and secondly, borrowing on housing produces “a rising ratio of external debt to G.P.D and increasing foreign ownership of the economy.

So, the million dollar question is how will our current government and bank economists deal with the fact that banks lending has been skewed towards property at the expense of business?

Morgan suggests bank and government economists should be regulating the economy so more money is allocated into investments that actually generate overseas income for the country. He even goes as far as to recommend that banks wind-back the favourable risk weighting they apply to mortgage lending and finishes with the statement that “ to argue (that ) we need to wait for the end of the slide before adopting corrective policies seems like a cop-out.”

So how do Morgan’s comments relate to your mortgage situation?

According to some New Zealand statistics it’s said that up to 40% of all mortgages are actually close to being in the negative equity zone. This is because many people bought housing at the peak of the price cycle and will face a future of rising interest rates and rising living costs.
Equitus is in the business of re-designing your mortgage so you avoid paying unnecessary interest and by managing your mortgage maths through time, Equitus can raise the equity in your property and give you control and certainty over your cash flow. Log onto www.homeloanrebate.co.nz and have us do you a free analysis to find out how much you could slash off your mortgage costs.