More rate rises happening

Weekly Home Loan Report: The trend for rising home loan rates has continued over the past week and it looks like they will keep rising for a while longer until falls begin again.

Tuesday, May 9th 2006, 8:17AM
It’s impossible to estimate how long the increases will continue for.

The reason why increases look likely to continue is that has been a contraction between rates and swap rates. This is well-illustrated in our graph on the Mortgage Centre page of Good Returns.

About the best we can say is that the market is still expecting rates to resume their downward trend towards the end of the year, but in the short term many of the indicators are indicating higher rates first.

This produces a conundrum for people taking out a new loan or looking to refinance an existing line of finance. As ASB says the challenge is to judge (a) the period that the down-trend stalls while the Reserve Bank calls for restraint and (b) the extent that lower interest rates have already been anticipated and hence built into current fixed rates.

The choice becomes this; Do you opt for the five-year rate which is the lowest fixed rate in the market and currently below its historical average, or do you go for something shorter and hope you can lock in a much cheaper rate at the next roll-over point?

This is where getting the help of a mortgage broker becomes a valuable option.

Before summing up rates and changes it is worth noting that comments in Good Returns’ earlier newsletters about Westpac’s change in strategy have been confirmed by the bank.

Westpac NZ chief executive Ann Sherry has confirmed that the bank will no longer stay aloof from the price war as it has done previously.

« Westpac changes its home loan strategyBNZ reckons it's the winner »

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