Weekly mortgage rate report: Up, up and away
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, it’s 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, and to see last week’s changes go to http://www.goodreturns.co.nz/section.php?CategoryID=200