A review of things you need to know before you go home on Tuesday; tighter LVRs, bigger discounts, softer demand, brighter WMP pricing?, swap rates drop sharply, NZD slips

Here are the key things you need to know before you leave work today.

TODAY’S MORTGAGE RATE CHANGES
No changes to report today.

TODAY’S DEPOSIT RATE CHANGES
NZCU Baywide has reduced many of its savings accounts by either -25 or -50 bps. It also cut -20 bps from TDs for terms three to five years. But even after these reductions NZCU Baywide’s offers are still quite competitive.

RBNZ TIGHTENS INVESTOR LENDING CRITERIA
Today’s RBNZ announcement that minimum investor LVR requirements would be lowered and made standard across the country (you now need a 40% deposit if you are an investor) came as a bombshell to the property investing ‘industry’. The RBNZ also effectively made the new rule apply from today, as well. The financial markets reacted with wholesale interest rates dropping sharply, and the NZD falling (see below).

TOWER CAN’T GET ON TOP OF ITS ISSUES
Tower has announced the resignation of its Chief Financial Officer of two years, Brett Wilson. Wilson will remain with the company until it appoints a replacement. The insurer has undergone a bit of change recently, with its CEO Richard Harding in August last year taking the reins from David Hancock, who had held the top job for two years. Wilson’s resignation has also been announced a day after A.M Best raised concerns over the company’s “financial profile deteriorating”. Its reinsurance for the February 2011 Canterbury earthquake has run out, so it’s digging into its own pockets to cover these costs. The ratings agency says the quake hangover could have a “material impact” on Tower’s “prospective financial strength”.

BIG DISCOUNTS
Petrol price discounting is now at its highest level ever, since MBIE started reporting them in 2006. According to data they release weekly, the average discount is now 14c/litre, taking the average pump price down from $1.892/L to an effective price of just $1.757/L. In July 2006 we were also paying $1.769/L although since then the price has risen as high as $2.226/L (in July 2014) and as low as $1.329/L (in January 2009). Over that same time, taxes on petrol have risen from 67c/L to 91c/L.

AUGUST CUT “A SHOE-IN”
The Reserve Bank of Australia released the minutes of its July meeting today and some of it was viewed by markets as “more gloomy than expected”. They seem to have left the door open to a further cut in interest rates next month to 1.5%, saying it will review this month’s inflation, housing and employment data to assess whether a change in policy is needed.

DEMAND SOFT
The latest hydrology reporting for our national hydro schemes shows our lakes are fuller than usual due to stronger inflows than usual for this time of year. Related reporting shows electricity demand down a few percent from this time last year and wholesale electricity prices weakening. Generators are offering slightly less electricity into the market as a consequence. With an economy firing on most cylinders, this data proves improving energy intensity. The situation looks likely to last – at some point Manapouri electricity will find its way into the national grid.

AUSSIE AFFORDABILITY WORSENS
New data from the Housing Industry Association revealed affordability slumped -3.7% in the three months to June 30 compared to the prior quarter. Melbourne recorded the largest decline in affordability, with a heavy -7.4% fall in the June quarter. It was closely followed by Canberra with a -5.7% decline, while Sydney, Adelaide and Brisbane saw affordability slide between -1% and -2%.

BETTER TOMORROW?
There is a dairy auction tomorrow morning. The latest futures pricing suggests it may be a firmer result.

SWAP RATES DROP SHARPLY
Wholesale rates fell across the curve today by about -6 bps. NZGB yields on the secondary markets fell even more. NZ swap rates are here. The 90-day bank bill rate has also fallen, down -51 bps today and is now at 2.33%.

NZ DOLLAR SLIPS AGAIN
On top of yesterday’s 1c drop, we have had a further ½c fall today. The NZD is now at 70.3 USc, at 93.4 AUc, and 63.5 euro cents. The TWI-5 is now back to 74.1. Check our real-time charts here.

You can now see an animation of this chart. Click on it, or click here.

Daily exchange rates

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for(i=0;i

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