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Volatility abounds

Mortgage rates remain volatile as lenders grapple with difficult conditions in financial markets.

Tuesday, February 12th 2008, 4:22PM

by Maria Scott

Some shorter term rates have been reduced, but non bank lenders seem to be having difficulty with the cost of longer term funding and several are now charging 10% or more for fixed rate loans over five years.

The major banks are all charging less than 9% over this term, and banking sources say that the contrasting moves in the market reflect the varying ways in which lenders raise funds to lend. The implication is that the banks may be in a stronger position in the mortgage market than smaller competitors in future, unless conditions in the wholesale markets improve.

Banks are able to draw on retail funds from savers, whereas smaller competitors fund mainly from the wholesale markets. Some smaller lenders also fund through private investors, from debentures, a form of retail investment where confidence has been badly knocked following the collapse of debenture-based finance companies.

Wizard Home Loans, part of the GE Money group, has withdrawn its five year rate altogether. Michelle Harrison, GE Money head of communications, says: "We have been experiencing significant spikes in longer term fixed rate funding. We do not believe that the causes of this volatility will remain for the long term, however the significant increase in funding costs for fixed rate periods of more than three years has resulted in us taking the view that for the immediate future we are better to withdraw from fixed terms of more than three years.

"We believe other lenders will also been experiencing similar increases. We will continue to review this and will quote a five-year rate if required, but will not advertise these rates till the volatility reduces.

Global Home Loans is among lenders charging 10% or more for five-year fixed rate money. Global draws funding from GE. The lender says that five-year loans form a small part of its lending overall and that it does not aim to compete on rates.

David Williams, general manager, New Zealand Liberty Financial, which markets low-documentation and other specialist lending products through brokers, says that Liberty has retained its three and five-year rates but adds: "Like all other financial institutions, we have had to take into account the cost of offering these products as the credit markets remain challenged."

Among the major banks, Westpac has withdrawn its two and three-year capped rate products from the market. Mike Davy, senior product manager, housing, explains: "We found that most demand has been in the one-year term."

Borrowers were willing to commit themselves one year ahead, but less inclined to do so over two and three years.

At present, borrowers taking the one-year capped rate pay 10.3%. The rate cannot increase beyond that level but can fall if the floating rate falls below 10.3%.

« Mortgage rates fall, but for how long?Interest bill for house doubled »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 ▲4.05 4.49
ANZ Special - 3.55 ▲3.55 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
BNZ - Classic - 3.49 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide ▼5.65 ▼4.75 ▼4.75 -
Credit Union North 6.45 - - -
Credit Union South ▼5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.54 3.54 3.69
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 4.14 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.39 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.39 3.45 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.45 3.99
Median 5.34 4.04 4.09 4.39

Last updated: 4 December 2019 9:11am

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