It's a great time to borrow

• Tweet

It is a great time to be a borrower with plenty of equity stored up in a property. If you timed your last decision about a mortgage right, which means that you will have borrowing due for renewal this year, you can expect to be able to choose from some record low rates.

Wednesday, February 4th 2009, 9:52PM

by Maria Scott

Mortgage rates have continued to fall following last week’s 1.5% cut in the official cash rate to 3.50%.

The view among market watchers is that it may be too soon to lock into longer term rates just yet. The feeling is that the OCR is likely to fall further bringing more cuts in floating and short term rates. But borrowers need to watch the market closely from now on.

Commonwealth Bank of Australia economist Chris Tennent-Brown says: “On balance we see the prospect for slightly better fixed rates in the near future. However, more conservative borrowers may now want to consider gradually ‘averaging into’ low long-term fixed rates.”

BNZ chief economist Tony Alexander says that the bank’s latest two-year rate of 5.89% is a record for the bank. The last time the rate was near this was in mid-2003 when it hit 5.99% for just two weeks. “That is most definitely not going to be the case this time around. Monetary policy is going to ease further, news from offshore continues to get bad, and the chances are rates will go lower.”

Rates now look tantalisingly low but this is only part of the story in today’s home loan market. Borrowers who need to borrow more than 80% of the value of their properties are likely to find it difficult to switch lenders, let alone get the best rates in the market. And some lenders are still charging more than 10% for floating rate money, which will be acutely painful for borrowers who are unable to vote with their feet.

Borrowers who are able to lock into low rates this year may might consider this as a golden opportunity to use the savings from previous higher rates to speed up repayment of their mortgages.

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Good Returns go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.