Three factors are in play for home loan borrowers at the moment – falling long term rates, an impending official cash rate review and competition.
For those borrowing on longer terms (three years or more) there has been a continuing reduction in rates over the past week. In fact the majority of the trading banks have reduced their three, four and five year fixed rates and some falls have been by as much as 30 basis points.
Major trading banks to move in the past week include ANZ, ASB, BNZ and Westpac.
For those borrowing on shorter terms, two years or less, the focus of attention is on the Reserve Bank’s review of its official cash rate on Thursday.
The consensus view from economists is that the bank will keep the OCR at its current level of 6.75%. This is despite warnings from the Reserve Bank governor Alan Bollard that rates could rise.
The growing expectation is premised on recent economic data, which suggests that the central bank has inflation under control and the economy is slowing as the bank wants.
Assuming the economists are correct it is unlikely that floating, six month and one year rates will move much in the foreseeable future.
As reported in the www.mortgagerates.co.nz home loan report last week, the Bank of New Zealand has launched the third of its so-called Unbeatable campaigns, this time offering to have the lowest rate of the big banks (but not their online subsidiaries) in the two and three year fixed market.
Its no-frills rate for two and three year home loans is 7.55%, while its standard rate is 7.80%.
In a not unexpected move, as it is a re-run of previous price battles, the ASB’s virtual bank and government-owned Kiwibank went below the BNZ offering two and three year rates of 7.50%. TSB Bank also has a two-year rate of 7.50% but left its three-year rate of 7.70%.
Amongst the big banks, ANZ pretty much matched the BNZ offer last week offering a 20-month rate of 7.55%. Meanwhile The National Bank has a special 27-month fixed home loan rate of 7.60%
Three year rates currently range from 7.50% up to NZ Mortgage Funds’ 8.25%. Most of the banks, including BNZ have three-year rates of 7.80%.
Five year rates range from Kiwibank’s 7.50% up to NZ Mortgage Funds’ 8.21%. Like the three-year market most of the bank rates are around the 7.80% mark.
