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Mortgage Rates Daily Commentary
Wednesday 28 September 2016  Add your comment
New numbers on real estate activity

A report out this morning says that nearly half a million New Zealanders (484,000) are planning to purchase, sell the property they live in, or sell another property (e.g. investment/holiday home) within the next 12 months.

Almost all the people are buyers (95%), with a high proportion of this group (38%) being first time home buyers (up from 34% in 2015). Over three quarters of market buyers are looking to purchase their primary residence (77%). Seventeen percent are buying for investment purposes –down from 19% in 2015. 

Buyers expect to pay an average of $524,671 for a property; the expected price has increased by 3% compared to last year.

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To fix or float, what is the answer?

Has New Zealand’s interest rate market fundamentally changed and does that mean attitudes towards floating versus fixed rates should change as well?

Monday, July 2nd 2001, 10:23AM

by Jenny Ruth

Stuart Marshall, economist at merchant bank Bancorp, thinks it has and attitudes should change.

He argues that he demise of the Reserve Bank’s monetary conditions index (MCI) in March 1999 and its replacement with the more steady and stable official cash rate (OCR) has meant a structural shift in the way New Zealand interest rates are priced.

"In this new OCR environment, and despite travelling through a period when monetary policy has completed a full tightening-neutral-easing cycle, the yield curve has managed only a fleeting foray with a negative slope (when long-term rates are higher than short rates)," Marshall says.

In other words, during the whole cycle, longer-term interest rates have usually been higher than short-terms rates.

Under the MCI regime, rates were generally higher and more volatile and for long periods long-term rates were lower than short term-rates.

That means under the OCR regime, fixing the interest rate on a loan will generally be more expensive.

"If we are correct that the interest rate market structure has indeed been altered, then policy should be reviewed," Marshall says.

"Absolute certainty of interest cost is likely now to come at a consistently higher price. Is that certainty still worth it?" he asks.

While his questions are directed at corporate treasurers, the logic should generally be the same for home loan borrowers, Marshall says.

The exception is when we get market distortions, as is happening right now.

Lenders’ profit margins on floating rate loans are currently nearly double that on fixed-rate loans. Most floating rates are now about 7.7% compared with the 90-day bank bill rate of 5.83%, a difference of 1.93 percentage points.

But one-year fixed mortgages are being offered at between 6.7% and 7.1% (and at least one offer at 6.45%), compared with the one-year swap rate of 6% in the wholesale market, a margin between 0.7 and 1.1 percentage points.

And three-year fixed mortgages are mostly being offered at 7.8% compared with the three-year swap rate at 6.8%.

"At the moment, if this is the low for short-term interest rates, then it means the variable rate is likely to be going up. That means locking away for three years at 7.8% is a good thing," Marshall says.

« Broking firm challenges the marketLower mortgage rates likely this year but not yet »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.59 4.75 4.79 4.99
ANZ Special - 4.25 4.29 -
ASB Bank 5.55 4.69 4.75 4.89
ASB Bank Special - 4.25 4.29 4.34
BankDirect 5.55 4.69 4.75 4.89
BankDirect Special - 4.25 4.29 4.34
BNZ - Mortgage One 6.25 - - -
BNZ - Rapid Repay 5.70 - - -
BNZ - Special - 4.29 4.29 4.49
BNZ - Std, FlyBuys 5.64 4.85 4.89 4.99
BNZ - TotalMoney 5.64 - - -
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 6.70 - - -
Credit Union Baywide 5.95 4.99 4.99 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct 6.10 6.45 6.69 7.10
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heretaunga Building Society 5.60 4.85 4.90 -
Housing NZ Corp 5.55 4.69 4.75 4.89
HSBC Premier 5.75 4.19 4.19 4.49
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - 3.79 -
ICBC 5.60 4.39 4.69 4.99
Kiwibank 5.25 4.70 4.75 4.29
Kiwibank - Capped - - - -
Kiwibank - Offset 5.25 - - -
Kiwibank Special - 4.19 4.19 -
Liberty 5.69 - - -
Napier Building Society 6.50 5.80 6.70 -
Nelson Building Society 6.10 4.85 4.99 -
NZ Home Loans 5.45 4.69 4.75 4.75
NZ Home Loans - Specials - - - -
Lender Flt 1yr 2yr 3yr
NZ Home Loans - Specials - 4.19 4.19 4.29
Perpetual Trust 7.70 - - -
Resimac 5.19 4.94 4.90 4.91
SBS Bank 5.54 4.75 4.89 4.99
SBS Bank Special - 4.25 4.15 4.55
Sovereign 5.65 4.69 4.75 4.89
Sovereign Special - 4.25 4.29 4.34
The Co-operative Bank 5.45 4.25 4.35 4.49
TSB Bank 5.54 4.75 4.75 4.99
TSB Special - 4.25 4.19 4.59
Wairarapa Building Society 6.20 5.75 5.95 -
Lender Flt 1yr 2yr 3yr
Westpac 5.65 4.79 4.85 4.99
Westpac - Capped rates - 5.15 5.25 -
Westpac - Offset 5.65 - - -
Westpac Special - 4.25 4.29 4.49
Median 5.65 4.69 4.75 4.89

Last updated: 26 September 2016 9:58am

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