Floating rates up, fixed down
UPDATED: It's been a busy week on the mortgage rate front with floating rates rising and fixed rates falling.
Tuesday, February 17th 2004, 2:10AM
In the past week all the major banks have increased their floating mortgage rates 25 basis points to 7.50% following the Reserve Bank’s surprise Official Cash Rate rise nearly a fortnight ago.
Likewise the majority of the non-bank lenders have increased their floating rates too, however they are all below the main banks. The lowest rate on offer is 6.80% from Equitable and Pacific Home Loans.
While the main banks have their floating rates at 7.50%, the second tier banks have their floating rates between 6.95% for Kiwibank to 7.45% for HSBC.
In contrast to floating rates fixed rates have been falling in the past week.
The biggest action has been in the two-year area where Bank of New Zealand dropped its rate to 6.99% and the biggest non-bank lender Sovereign followed dropping its rate to 7.10% today.
ANZ economist David Drage says the best deal for borrowers is around the one and two year rates.
His view is that the Reserve Bank is likely to increase the OCR another 25 basis points at the start of March and probably at least once more during the year.
The range of increases may be limited if the dollar either stays high or keeps rising.
However, Drage says that rates may start to fall at the start of next year. If this scenario pans out then mortgage rates will fall.
He says fixing for 12-18 months will see borrowers through the higher interest rate period.
"People who fix over this period will have significant reduction in interest costs," he says.
BNZ economist Tony Alexander says fixed rates are now 1% above their record lows of July last year while floating rates are up 0.4% with another 0.5% to go this year.
For a full list of changes go the Rates Page.
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