As New Zealand moved to alert level 4 for coronavirus, most businesses revenue will be taking a hit. In response, the Government has announced a series of multi billion dollar support measures for business and households.
So let’s break down how the current political and financial climate may impact you – and how we can help.
Homeowners and Mortgage Holders
Interest rates have come down to record lows following the Reserve Bank dropping the official cash rate to an all-time low of 0.25%. The Government and banks have also agreed to give impacted mortgage holders, a six-month payment holiday on both the interest and principal of their mortgages.
Be wary though, there is no such thing as a holiday. It’s actually a deferment where the money will either be added to your outstanding balance or your mortgage term will be extended.
A better option could be for you to apply for a period of interest only payments on your mortgage. The benefit of this is the balance of your mortgage will still be the same as it is today at the end of the interest only period.
Let’s compare the two, on a $300,000 mortgage with a 30 year term at a previous average interest rate of 3.45%, your monthly payments would be $1,339 per month.
If you took a repayment holiday for 6 months, the principal portion would cease and the interest portion ($862.50 per month would continue to be calculated and then added to your balance which would be $305,175 at the end of the 6 months.
If you took a 6 month Interest Only period on your mortgage, your mortgage payments would drop from $1,339 per month to $862.50 per month, a saving of $476.50 per month. At the end of the Interest Only 6 months, your balance would be $300,000.
For many of us the monthly saving of $476.50 will be enough relief to keep us going and in my opinion far better than seeing your debt grow.
However for some, there may be no other option but to ask for a repayment holiday. Banks are currently working on this initiative to set up and have this facility available to their customers. You will have to apply for the Mortgage payment holiday scheme. Please go through your bank’s website and apply accordingly.
Lender Contact Details
Phone – 0800 240 438
Hardship Assistance – https://www.anz.co.nz/comms/financial-hardship/how-to-apply/
COVID Support – https://www.anz.co.nz/here-to-help/?pid=RET-CHA-HBA-heretohelp
Phone – 0800 272 735 / email@example.com
Hardship – https://www.asb.co.nz/banking-with-asb/our-commitments-to-customers-in-financial-difficulty.html
COVID Support – https://www.asb.co.nz/page/covid-19.html
Phone – 0800 375 007
Financial difficulty – https://www.bnz.co.nz/support/everyday-accounts/managing-accounts/experiencing-financial-difficulty
COVID Support – https://www.bnz.co.nz/contact/covid-19-update
Phone – 0800 772 771
Financial hardship – https://www.westpac.co.nz/managing-your-money/financial-hardship/
COVID Support- https://www.westpac.co.nz/who-we-are/covid-19/financial-support/
Buying a property during lock down
Don’t discount your plans just yet. Interest rates are very attractive and there are some attractive properties on the market.
The New Zealand property market was holding up well in the early stages of COVID-19 and had been experiencing strong price growth over summer. With banks and the Government coming together to support workers, businesses and the risk of property owners losing the shirt off their back or the roof over their head reduces, minimising the risk of a market crash.
Logistically however, the lock down proposes challenges around open homes and auctions and also access to professionals such as solicitors. We can help you navigate these disruptions to still get an outcome.
All major insurance companies are providing forms of hardship assistance support due to the COVID situation. Here are some of the examples that may be available to you, under your insurance policy
- Premium Holiday – a built-in benefit which allows you to stop paying premiums for up to six months if they’re unemployed or experiencing financial hardship. Claims are still able to be made during this time.
- Premium Freeze – allows you to freeze your stepped premium on lump sum covers for 12 months. This option reduces the lump sum benefit and applies from the policy anniversary.
- A mixture of stepped and level premiums – options are available to suit long-term cover needs while matching short-term pricing needs.
Options under Disability Income Covers:
- Premium and cover suspension – allows you to suspend their premiums and cover for up to 12 months if they are experiencing financial hardship or are unemployed or on long-term leave from work. Cover can be reinstated at any point within the 12 months without further medical underwriting.
The Government has announced $2.8 billion in business tax changes to free up cashflow, including a provisional tax threshold lift, the reinstatement of building depreciation and writing off interest on the late payment of tax.
Sick leave and isolation support: 126 million dollars has been allocated to support staff to take sick leave for self-isolation, or stay home when sick with COVID-19.
Aviation support package:
600 million dollars targeted to support the aviation sector.
The Business Finance Guarantee Scheme:
A $6.1b scheme allowing qualifying businesses to borrow up to $500,000 for a maximum of 3 years. Banks will be expected to provide these loans at competitive rates. The Government will carry 80% of the credit risk, with the other 20% to be carried by the bank.
Impacted businesses can access a wage subsidy of $585 a week per full-time employee and $350 a week per part-time employee for up to 12 weeks at a cost of up to $9.1 billion.
To qualify businesses need to commit to continue to employ staff and pay them 80% of their current wage, show they have suffered or project to suffer a 30% or more reduction in revenues and have taken steps to mitigate the impact of COVID-19 on their business.
The initial $150,000 cap was removed which means basically every impacted business will be covered enabling them to support their workers.
Professional Financial Solutions Support Team
Please feel free to contact our team members. They are available to assist you.
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While the details are being worked out, we urge you to stay calm and check our website – https://www.professionalfinancial.co.nz/news/ for future announcements from the banks.
We will keep you posted with all the updates from banks as they make it available to us.