The Reserve Bank’s decision to push up the Official Cash Rate to 6% 11 days ago (Thursday July 29) has finally been expressed in the home loan rates offered by most lenders in the past week.
During the week most providers increased their rates in short term area, however the response has been varied.
Normally when the central bank increases its OCR lenders increase their floating rate by the same amount. The reasoning behind this is that short-term lending rates are set off what is happening in the New Zealand money market and the longer-term rates are set off the United States market.
Last week though not all home loan providers who increased their rates increased their floating rate, those who did moved by the same 25 basis points as the Reserve Bank. The other development was that many lenders also increased their short term fixed rates (six months, one year and two year) by around 10 basis points.
What’s the best deal at the moment? The consensus view is still clearly that fixing for two years is the best option. The most noticeable developments in this area are that BNZ is no longer undercutting its competitors, as it did earlier this year.
Its standard two-year rate is 7.60%, however it is offering 7.40% for on some products.
Last week HSBC introduced a special two-year rate of 7.29% - apparently in response to SuperBank’s launch which included a 21-month rate of 7.29%.
SuperBank is no longer advertising this rate and has put its two-year rate up to 7.65% which is higher than most of the other banks.
HSBC is now offering the best deal in this area, but has said that “demand for this rate has seen our funds almost fully booked” and the offer closes on Friday August 13.
Key changes during the week were:
- All the major trading banks with the exception of National Bank and TSB increased their floating rates.
- The highest floating rate in the market is the NZ Mortgage Income Trust at 8.50%. However this firm is not a large player. Westpac has the second highest rate at 8.35%.
- Most of the trading banks are sitting at 8.25%.
- The lowest standard floating rate in the market is NZ Mortgage Funds at 7.45%.
- Very few lenders moved their longer-term rates. The only three providers who hiked their four and five year rates during the week were SuperBank, Resi Home Loans and Pioneer.
- What does a 25 basis point (quarter of one percent) interest rate equate to? On a table mortgage of $100,000 over a 20-year term, its an increase of $15.68 per month (one half decent bottle of wine). For a $150,000 mortgage on a 25-year term it’s about $24.05 extra a month.
To monitor all the mortgage rate changes as they are announced go to the Mortgage Rates Page
