Merry Christmas from the Velocity Financial Team.

We hope you have a great festive season, and get a chance to relax and do what you love doing.

To finish the year, we summarise the things of note that have happened in our industry that may have had an impact on you. We make some predictions for 2020 and hold ourselves to account for our 2019 predictions (mixed results there!)

Goings and Comings

This year we have said goodbye to Alex and to Kylie. Debra has taken a few months off and we hope to see her back next year. We welcome Danielle who is working in a client management role alongside Brendon. Welcome, Danielle!

Interest Rates

As you will see below from last year’s predictions, few (including no one at Velocity) predicted interest rates to be in the mid 3.00%’s now. Great if you have a Home Loan coming up for review or you are looking to get in the market. What do we think rates will do next year? Keep reading...

Capital Ratios

Stop press: On Thursday (5th Dec) the Reserve Bank made their announcement as to how much capital they will make banks hold. This is for the purpose of ensuring our banks are sage and can stand large financial crisis. The side effect is it will be costly for the banks to do this. The Reserve Bank stuck to their guns and have significantly increased the amount of reserves banks will need to hold. The big Aussie banks have been hardest hit, but the smaller NZ owned banks also see increases. These changes begin in July next year and will take seven years to fully implement. The Reserve Bank estimates it will add 0.2% to mortgage interest rates. The banks are saying it will be a lot more!

LVR Ratios

Despite some predictions to the contrary, no changes to these were announced this year. In simplistic terms, you still need the standard 20% deposit/equity to buy an Owner-Occupied Property and 30% for a Residential Investment Property. Factors for the lack of change here include housing prices continuing to be strong, and the regulators not wanting to increase house-price inflation at this stage (by pouring low deposit options on to a low-interest rate). Add in the high-net migration environment, and we have ourselves a recipe for ‘no change’. However, as is often the case, exemptions do apply!

Insurance Products

Insurance companies are always looking to innovate to attract new customers. Our pick of the two best innovations for 2019:

AIA (now incorporating AIA and Sovereign) have launched their 'Vitality' program (think TV adds with Ian Jones, Valarie Adams). In short, instead of lumping everyone in the same 'standard' risk portfolio, they are rewarding you (discounted insurance premiums, airpoints etc) if you have a healthy lifestyle. If you can track steps, sleep, get regular health checks etc, there is a financial incentive to do so.

Best Doctors: Best Doctors is a separate company that accesses medical specialists throughout the world to give you a second opinion on diagnosis and treatment options. Currently Accuro health insurance and Asteron offer "Best Doctors" with certain products. What we really like is the new mental health add-on where you can get access to Mental Health Professionals for diagnosis and treatment - all included in your insurance premium.

Closing hours over Christmas

The Velocity office will be officially closed from 5pm Friday 20th December and reopening 9:00am Monday 6th January.

For anything really really urgent during this time, please phone your adviser on their cell phone and they will respond as they are able.

Here is 2019’s round of annual Velocity predictions, followed by last year’s results:

The 1-year discounted fixed rate in December 2020 will be:

2.90% - Stevie

2.99% - Rebecca

3.05% - Danielle

3.20% - Simon

3.30% - Graham

3.30% - Lance

3.50% - Brendon

3.60% - Willie

Who will win the 2020 National Election?

Graham: It will be the same as the current crew

Lance: Eddie Jones

Willie: Vernon Tava and the Sustainable NZ Party will win a moral victory. Labour will get back in, thanks in no small part to National's lack of a popular leader

Stevie: Labour

Brendon: Labour will look to form a Government (who they will need in coalition is a whole other question)

Simon: Jacinda will be back

Rebecca: At this point I think Labour unless National gets a new leader

Danielle: Jacinda Ardern 100%

What will be the must-have fashion item of 2020?

Graham: If you wear one, skinny ties are the thing

Lance: A smile...but if you can’t manage this, for the gentlemen out there a nice bold coloured leather ‘man clutch‘.

Willie: Hopefully a sense of pride and confidence in yourself to not follow 'the trend' just for the sake of it. Failing that, 1980s Walk Shorts!

Stevie: Tassled suits

Brendon: I have heard a whole range of Polar Fleece business wear is currently being cooked up for next winter season. Watch this space.

Simon: Disco collars

Rebecca: Flares might make a comeback ha!

Danielle: You're never fully dressed without a smile

What life lesson have you learnt in 2019?

Graham: Growth is always a mixture of reflection and pain

Lance: That up is sometimes down

Willie: I was reminded this year that getting things sorted during the good times is so much easier than trying to sort them once the bad times have hit.

Stevie: Focus on challenging and improving yourself today, don't focus on tomorrow until tomorrow

Brendon: Learn to not look at Emails when I am not wanting to be working

Simon: Never underestimate the power of compounding interest

Rebecca: Simplifying life to enable you to enjoy the important things is both achievable and rewarding

Danielle: The Wellington bus system is to be approached with flexibility and an air of spontaneity

Last year’s predictions:

What will the one-year discounted rate be this time next year? (ie December 2019)

Alex: 4.45%
Brendon: 4.20%
Debra: 4.25%
Graham: 3.95%
Kylie: 4.05%
Lance: 4.10%
Rebecca: 4%
Simon: 4.25%
Stevie: 4.22%
Willie: 4.20%

A good 1-year discounted rate is 3.39% so Graham wins this, but fair to say no one was picking this well! Consider this when asking your mortgage adviser what they think rates will do!

What will Wellington House Prices do in the next year?

Alex: Gain another 5-7% but only good housing. Lack of maintenance to properties will start to affect house prices more and more - due to very high building cost and the need for better standards for rentals.
Brendon: Housing prices will flatten off however sales will continue to sadly bumble along.
Debra: No movement, I think house prices will stay flat
Graham: Prices will stay flat
Kylie: They will flatten
Lance: They will still increase however this will be a more steady.
Rebecca: Increase slightly then level out.
Simon: Prices will remain the same
Stevie: Prices will plateau with little growth compared to summer 2018
Willie: Not much - will be steady throughout the year

We will give this to Lance -even though his sentence doesn't make sense. According to QV, the latest stats (October 2018-Oct 2019) showed a 6.40% increase in house prices for the Wellington region in that year.)

Will Donald Trump still be US president in Dec 2019?

Alex: Yes, 100%, you can say whatever you like about the person - the current US administration (on paper) has been doing incredibly well for America.
Brendon: Yes
Debra: Donald Trump will still be president in 2019, elections not till 2020!
Graham: Unbelievably Yes and the suspension of rational thought shall continue
Kylie: No
Lance: No, however he will be the only challenger for Justin Lester for the Wellington Mayoralty...and will come a close 3rd
Rebecca: Yes
Simon: Yes but he will get arrested the day after his term ends!
Stevie: Yes
Willie: Yes, the All Blacks WILL WIN the 2019 Rugby World Cup!

A fail to Lance and Kylie, but the biggest fail is reserved for Willie.