Banks SLASH fixed mortgage interest rates!
Anyone else confused? ANZ have slashed their 5 year fixed rate from 8.5% to 7.75% and all long term rates have been cut by between 0.45% and 0.75%. Kiwi Bank have cut their 2 year rate from 7.3% to 6.99%.
Only yesterday the Finance Minister Bill English said “Home buyers were starting to realise interest rates were on the way up. I suspect that’s going to keep the housing market damp for some time yet.” So who is right?
With regard to the newspapers these huge rate cuts should be headline news but have hardly been given a mention!
We now have the situation where floating interest rates are on the increase and fixed rates are on the decrease. The banks appear to be positioning themselves for the surge of people who are expected to swap from floating rates to fixed rates and as the figures below show there are plenty of customers to fight over.
Here is the composition of fixed vs floating mortgages in New Zealand comparing June 2008 with April 2010:
June 2008 349,253 Floating vs April 2010 617,519 Floating
April 2008 976,077 Fixed vs April 2010 762,623 Fixed
Those 617,000 floating in April were doing so at an average rate of 5.8% and this has since increased to around 6%
Reserve Bank expect OCR to hit 5.75% to 6% over next 18 months to two years.
As floating rates increase a large proportion of those floating will fix – lets say 250,000 of them so that’s a lot of customers who will be looking at which bank offers the best rate as they look for the security of a fixed rate rather than staying on a risky floating rate that could hit 8% to 8.5% within the next 18 months if you are to believe Mr Bollard who says “The bank forecasts the 90-day bill rate will rise to around 6.1 per cent by the end of 2012 from around 2.9 per cent now.” (Banks usually have a 2% margin on top of the 90 day bill rate)
Many sellers will now take their homes off the market and refinance at the lower rates and keep their properties – there has been no sign of a surge of listings since the Budget and there is not likely to be now that these low fixed rates have been announced.
July 02 2010 11:08 am | Uncategorized
Ross Brader AREINZ
