Cash rate cut or not, many borrowers can do better

Cash rate cut or not, many borrowers can do better

Difference between highest and lowest home loan rates on CANSTAR’s database could save borrowers hundreds per month.

The RBNZ left the official cash rate on hold this month – but the real message for home loan borrowers is to give themselves their own rate cut by shopping around.

“Currently on the canstar.co.nz database, the difference between the highest and lowest floating home loan rate is 30 basis points – 0.30 percent,” said CANSTAR Research Manager, Mitchell Watson. “It mightnot seem like a significant amount, but our national median house price is $426,000. So for buyers with a $300,000 home loan that 30 basis points equates to a difference of around $57 per month on a 25-year home loan. For homeowners that’s money that’s better off in their pocket.”

Those who are willing to fix their rate for a couple of years can potentially do even better, with the minimum and maximum 2-year fixed rate on CANSTAR”s database being 5.39% and 6.09% respectively.

“There seems to be a real price war at the moment in terms of 2-year fixed rates,” said Mr Watson. “Borrowers who are eligible to lock in a rate of 5.39% for two years would be looking at monthly repayments of around $1,823 per month on a $300,000 home loan. That’s potentially around $200 less per month than the floating option. It’s therefore not surprising that more borrowers have been locking in their home loan rates over the past twelve months; they are already voting with their feet.”
Current home loan rates on CANSTAR’s database are as follows:
Floating rate Loan size Interest rate Monthly repayment Lifetime cost
Minimum $300,000 6.55% $2,035 $610,501
Maximum $300,000 6.85% $2,092 $627,515
2 year fixed rate
Minimum $300,000 5.39% $1,823 $546,782
Maximum $300,000 6.09% $1,949 $584,833

Source: Canstar.co.nz. Based on loans on Canstar database.Calculations based on a 25 year loan term.
It’s not all about the rate
Interest rate is going to be a very signifciant factor for borrowers, but Mr Watson warns that it’s not all about the rate. “Features such as the availability of an offset account, the ability to make extra repayments and/or redraws and to split the loan can all be important for some borrowers,” said Mr Watson.
“As a borrower, assess what you need from a loan and find a product that has the ideal mix of price and features to suit your needs.”

CANSTAR research analysts have crunched the numbers for borrowers, comparing 56 loans from 10 providers. The comparisons encompass floating, fixed-rate and line-of-credit loans for both residential and investment purposes. Overall CANSTAR found:

• 2 products offering outstanding value for standard floating-rate home loans
• 2 products offering outstanding value for residential fixed-rate home loans
• 2 products offering outstanding value for line of credit loans
• 3 products offering outstanding value for investment floating-rate home loans
• 2 products offering outstanding value for investment fixed-rate home loans

The details are in the attached Star Ratings report CLICK HERE.

ENDS

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