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Outlook for house prices

Interesting news on the housing front today. ASB, in its housing confidence survey, says expectations of house price growth have cooled significantly in the January quarter. [READ ON]

Meanwhile, Westpac are forecasting a gain of 7% for house prices this year, compared to an estimated 15% rise in 2016 and 11% in 2015.

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Floating rates sink while fixed rates rise

Although central banks both overseas and in New Zealand are cutting interest rates and floating mortgage rates are also coming down, fixed-term mortgage rates have begun rising again.

Friday, April 27th 2001, 3:42PM

by Jenny Ruth

Although central banks both overseas and in New Zealand are cutting interest rates and floating mortgage rates are also coming down, fixed-term mortgage rates have begun rising again.

WestpacTrust, for instance, cut its floating home loan interest rate last week from 8.25% to 7.95% immediately after the Reserve Bank of New Zealand cut its official cash rate from 6.25% to 6%.

But the same day, the bank raised its two to five-year fixed rates by between 20 and 30 basis points. The three-year rate rose from 7.1% to 7.4% and the five-year fixed rate rose from 7.4% to 7.6%.

Adrian Orr, chief economist at WestpacTrust, explains that while the Reserve Bank controls New Zealand's short-term interest rates, long-term rates depend on what's happening to world interest rates, most importantly those in the US.

US Treasury bond yields have started rising in recent weeks and New Zealand government bond yields have followed suit. The November 2011 bond, for example, has risen from as low as 5.83% on 19 March and was trading this afternoon at 6.43%.

That's much higher than the equivalent US Treasury bonds which are currently trading at 5.19%. `We're all accessing the same pool of international capital and there's a certain food chain as to who gets to drink first and at what price,' Orr says.

That's called a country's risk premium and New Zealand, being a small and internationally vulnerable country, has a premium of between 80 and 120 basis points above US yields.

US yields have been rising even though the Federal Reserve in the US has been cutting rates much more aggressively than New Zealand's central bank. While both banks began this year with their benchmark rates at 6.5%, the Fed 's federal funds rate is now down at 4.5%.

That's because the Fed wants to stimulate the sluggish US economy. Our central bank is faced with a reasonably buoyant economy but the slowdowns in the US and Australian economies, our major trading partners, threaten the longer-term growth outlook.

`Financial markets are considering that the end of the monetary policy cycle in the US isn't too far away,' Orr says. The markets expect the Fed may cut its rate to 4%, but it won't go much lower than that.

If the Fed's rate cuts produce the desired result and US growth picks up, `by the end of next year, we may be in a rising US interest rate environment,' Orr says.

« Warehouse looks to the mortgage marketNBNZ calls for further rate cuts »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.69 4.89 5.29 5.49
ANZ Special - 4.39 4.79 -
ASB Bank 5.80 4.99 5.19 5.49
ASB Bank Special - 4.59 4.79 5.09
BankDirect 5.80 4.99 5.19 5.49
BankDirect Special - 4.59 4.79 5.09
BNZ - Mortgage One 6.25 - - -
BNZ - Rapid Repay 5.70 - - -
BNZ - Special - 4.59 4.79 5.09
BNZ - Std, FlyBuys 5.79 4.99 5.19 5.49
BNZ - TotalMoney 5.64 - - -
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 6.70 - - -
Credit Union Baywide 5.95 4.99 ▲5.25 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heretaunga Building Society 5.60 4.85 5.10 -
Housing NZ Corp 5.65 4.80 5.19 5.49
HSBC Premier 5.59 4.19 4.39 ▲4.89
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.60 4.39 4.69 4.99
Kiwibank 5.40 4.90 5.19 5.55
Kiwibank - Capped - - - -
Kiwibank - Offset 5.40 - - -
Kiwibank Special - 4.45 4.79 5.25
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 5.10 5.45 -
NZ Home Loans 5.65 4.90 5.19 5.55
NZ Home Loans - Specials - - - -
Lender Flt 1yr 2yr 3yr
NZ Home Loans - Specials - 4.35 4.79 5.09
Perpetual Trust 7.70 - - -
Resimac 5.30 4.86 4.94 5.30
SBS Bank 5.54 4.89 5.19 5.49
SBS Bank Special - 4.45 4.75 5.09
Sovereign 5.90 4.99 5.19 5.49
Sovereign Special - 4.59 4.79 5.09
The Co-operative Bank - Owner Occ 5.55 4.55 4.85 5.25
The Co-operative Bank - Standard 5.55 5.05 5.35 5.75
TSB Bank 5.65 4.80 ▲5.15 ▲5.45
TSB Special - 4.45 ▲4.75 ▲5.05
Lender Flt 1yr 2yr 3yr
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.65 4.99 5.19 5.49
Westpac - Capped rates - 5.15 5.25 -
Westpac - Offset 5.65 - - -
Westpac Special - 4.59 4.79 5.09
Median 5.69 4.85 5.12 5.38

Last updated: 17 February 2017 9:48am

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