by Jenny Ruth
Wizard’s survey was conducted by well-known research firm Colmar Brunton. They interviewed 500 people chosen randomly nationwide and of them 200 had mortgages and contributed to the survey.
Of those, 52% were taking advantage of falling interest rates by keeping their payments the same and therefore paying off their loans faster. And 69% said they would like to put at least some of their mortgage onto floating rates.
Jeremy Todd at Colmar Brunton says that, in an ideal world, the size of the survey would be bigger, but that it was still large enough to get meaningful results. The poll is subject to a maximum plus-or-minus 7% margin for error.
While you could say the results are just what Wizard would want to hear, given that its most competitive product is its floating rate mortgage, Wizard New Zealand head John Grant says the finding that people want to repay their loans faster isn’t in Wizard’s interests.
"The quicker people pay off a loan, the less money we make on it," Grant says. Nevertheless, Wizard gives its customers all the information they need to pay their mortgages off faster because it believes that leads to satisfied customers and repeat and referral business, he says.
As far as the survey goes, "it’s not a compelling result. It’s not necessarily showing a huge trend or change." But when interest rates are falling, there is naturally more interest in floating rate products, he says.
Wizard’s survey was conducted ahead of the Reserve Bank’s decision last week to cut its Official Cash Rate (OCR) to 5%. It was the bank’s third cut to the OCR this year from 5.75%.
ASB Bank chief economist Anthony Byett says between 50% and 60% of the home loans his bank is writing are fixed rate loans, although he says it is sensible for those on floating rates to keep their payments steady as rates fall.
Bank of New Zealand head of business development of personal financial services, Tim Deane, says his bank has experienced a marked trend away from floating rate loans and towards fixed rate loans in the last six months. More than two-thirds of BNZ’s mortgage book is in fixed rate loans, he says.
And since the Reserve Bank’s move last week the trend towards fixed rate loans has significantly increased, he says. Partly, that reflects the urgings of the bank’s chief economist Tony Alexander urging people to take advantage of low fixed rates.
Nevertheless, BNZ does put a big emphasis on customers’ ability to repay loans faster with its Tailored Home Loan, which can be fixed or floating or both, and Rapid Repay Loan, which is a floating rate product.
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