Quiet before the storm?

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January was a quiet month for mortgage rate changes - but will February be the same?

Wednesday, February 4th 2004, 9:04AM

A quiet month after the equally quiet Christmas period: the most notable event during Janurary was of course the surprise increase in the OCR by the Reserve Bank. However, as this came at the end of the month, the real impact will be seen in February.

The latest mortgage interest rate survey conducted by Good Returns (www.goodreturns.co.nz), shows little movement for floating rates for the first month of 2004. As a recent story by Good Returns noted however, Kiwibank was very late in responding to a rise in wholesale rates back in November when it finally increased rates from 6.55% to 6.75% last month. Regardless its floating rate is still 45 basis points lower than the lowest of the major home lenders.

The spread in interest rates at the end of the month was also significant: the highest floating rate on offer as at 31 Jan 2004 was 7.95% while the lowest was 6.55%.

Six month fixed rates showed no major change during January. The highest rate offered at the beginning and the end of the month was 6.75%, the lowest was 5.95%. Kiwibank was alone in changing its six month fixed rate during the month: a reduction from 6.6% to 6.55%.

One year Fixed mortgage rates also saw little significant change. No clear pattern was apparent among those who did shift rates during the course of the month. (See graph 1 year fixed rates.) The range of rates for January was 6.15% to 7.4%. Most providers were offering between 6.85% to 6.95%.

Providers tended to move their longer term fixed rates in unison. The list of providers who took such action in January included; The National Bank, Cairns Lockie/eMortgage, Elders, Equitable, Resi Home Loans, Wizard, Kiwibank, GEM Home Loans, PSIS, Sovereign and NZ Home Loans. The majority of these providers moved their fixed rates down during the month. For example the National Bank moved their two, three, four and five year fixed interest mortgage rates down by 10 basis points.

At the end of the month the range of rates for 2 year fixed interest mortgages was 7.1% to 7.8%. For three year fixed interest mortgages the range was 7.3% - 7.9%. Four year fixed interest rates ranged from 7.55 - 8% and five year fixed interest rates ranged from 7.5 - 8.1%.

Three providers bucked the trend for five year fixed interest rates and ended the month with a rate higher than that offered at the beginning. Nevertheless, most providers were offering between 7.65 - 7.75%.

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