Competition Intensifies In Mortgage Sector

12 August 2002

Competition Intensifies In Mortgage Sector

Mortgage rates continue to tighten, according to the latest Mortgage Interest Rate Survey conducted today (12 August) by the Real Estate Institute of New Zealand (REINZ).

REINZ National President, Rex Hadley, said the survey showed margins between lenders narrowed during the month as lending institutions jostled for position in the lucrative mortgage market.

Floating rates for first mortgages ranged in a tight band, between 7.60 to 8 percent, with seven lending institutions moving rates marginally upwards during the month.

Mr Hadley said there could be rate changes downwards following this week’s Reserve Bank statement due on Wednesday.

“Most economists and the markets are picking the Reserve Bank will leave its Official Cash Rate (OCR) unchanged at 5.75 percent this week, largely because of continued weakness in global equity markets, and following on the lead of the Reserve Bank of Australia in maintaining the status quo last week” he said.

With institutions generally pricing their floating rates between 150 to 200 basis points above the 90-day bank bill rate, he said there appeared to be room for some easing, as only five of the 15 lenders surveyed are offering rates less than 200 basis points above the OCR.

“Unless the Reserve Bank makes a surprise move on Wednesday, lending institutions are likely to come under some pressure to lower their floating rates.”

Longer fixed term rates range between 6.75 – 7.20 percent for six months; 6.90 – 7.20 percent for one year; 7.40 – 7.60 percent for two years; 7.59 – 7.85 percent for three; 7.65 – 7.90 percent for four and 7.67 – 8.09 percent for five years.

Mr Hadley did not discount further rate increases later this year.

“Even though the New Zealand dollar has dropped back recently, we note unemployment is at a 14 year-low, retail sales remain strong, and consumer confidence is at an 11 year high. The Reserve Bank is likely to move to meet its mandate of controlling inflation, as the country remains close to its maximum 3 percent inflation target.”

- ends -

© Scoop Media