It’s still the two-year rate that’s been making headlines in the last couple of weeks.
Bank margins have tightened significantly on the two-year term following our latest Official Cash Rate cut on 19 February, with most lenders now offering a two-year fixed rate of 4.99%.
Given that mortgage rates are expected to settle between 4.5% and 5% once we’re back at a ‘neutral’ OCR, around 3%, that’s a pretty good deal—and one which is proving really popular among borrowers at the moment.
The majority of people fixing or refixing at the moment are choosing to lock in for two years, or, for those wanting to hedge their bets, opting to split their loan across either a one- and two-year, or one- and three-year term.
Once competition heats up a little further among the banks, we may see the one-year rate drop to around the 4.99% mark as well, but for now, the two-year rate is a great option.
Floating and six-month rates are sitting significantly higher than that two-year rate at the moment—making them an expensive option for borrowers.
Unless you really need the flexibility, such as because you’re planning to sell in the near-term, the added cost of holding out on a shorter-term rate (in anticipation of further rate falls to come) is likely no longer worth it.
On the cash back front, we’re consistently seeing the banks offering 0.9% at the moment.
That’s it for this week—check in again next week for our latest update on what’s been happening with New Zealand interest rates.
