Only 29.1% of mortgages were at floating rates, as at August 30. This is significantly down on previous years. Two years ago the figure was 39.6% and a year ago it was 33.7%.
The increase in fixed rate loans recently has come predominantly in the over one year area with the proportion of loans coming up for renewal within a year from August trending down since early last year when fixed rates started heading to their record lows.
This data confirms the view that the Reserve Bank’s moves to increase the Official Cash Rate will be having little impact on home loans.
When it moves the OCR it is directly reflected in variable home loan rates, but doesn’t impact on fixed rates as they are priced off other variables, such as interest rates in the United States.
“Most people are not going to feel the effects of high floating mortgage rates for a long time and even now those who do roll into fixed can reset at a low rate,” BNZ economist Tony Alexander says.
Those people with less than one year to run on their fixed rate are sitting currently on an average rate of 6.8%. They can lock in at the moment for one year at 7.5%, two years 7.4%, or three years at 7.65%.
“Their interest rate will go up by about 0.7% and this will act as a small drag one imagines on their finances. “
Alexander says it should be noted that the current two year fixed rate of 7.4% is 0.2% below the average floating rate over the past five years.
As at August there were 1,054,915 mortgages of which 523,126 were fixed and 531,779 floating. This puts the average size of the $26.8 billion worth of floating rate mortgages at $50,500 while the average size of the $64.9 billion worth of fixed rate mortgages was $124,000.
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