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Interest rate warning for borrowers

ASB is expecting floating home loan interest rates to reach 6% by March next year.

Tuesday, May 7th 2013, 6:00AM 3 Comments

by Susan Edmunds

At the moment, it is offering a rate of 5.75%, roughly the middle of the market. But it expects a gradual increase in the official cash rate over the next couple of years to push up interest rates across the board.

Mortgagerates.co.nz polled some of the country’s economists on what they think home loan borrowers will be paying over the next few years.

UBS expects the rise in interest rates to happen much faster than other pundits are predicting. Its economists are picking a median floating rate of 6.6% by next March, up from 5.8% now.

All of the economists expected some movement in the rates borrowers pay by the end of the year. By the end of next year, they all expect floating rates to be at least 6.4%.

By the end of 2014, Infometrics is picking a floating rate of 8.8% and ASB forecasts 7.25%.

They were also asked about their predictions for the Official Cash Rate. All expect the next move in the rate to be a rise of 25 basis points. None expected the rate to be cut.

JP Morgan and UBS expect that rise to happen in September while ASB, BNZ, FNZC and Infometrics think it is more likely in  March next year.

From there, they all expect the rate to steadily climb. BNZ expects it to reach 4% by December next year and Infometrics expects it to climb to 6% in March 2016.

ASB and BNZ both expect the rate to level out once reaches a peak of 4% and 4.5%, respectively.

ASB economist Jane Turner said that would take mortgage rates to about the historic average and reflected a neutral setting for the economy.

She said there was an increased level of sensitivity to interest rate movements in the market because of the amount of money out on mortgages.  The high levels of debt would mean the Reserve Bank would not have to be so aggressive with its monetary policy to have an impact, she said.

She also expected the dollar to remain strong, which would do some of the work that monetary policy would usually have to do.

Turner said ASB had been warning for some time that borrowers needed to be prepared for the possibility of rising interest rates.

But she said the Reserve Bank would be raising rates in response to increased household incomes and better confidence levels. “Rising interest rates would probably offset that slightly but I don’t think households will struggle – the rate will be rising because things are improving.”

« More action with one-year home loan ratesRBNZ introducing macroprudential tools 'soon' »

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Comments from our readers

On 15 May 2013 at 12:51 pm davo said:
Considering the banks have been "factoring in" an interest rate rise for well over 18 months this just seems like scaremongering considering RBNZ comments etc. - perhaps they will go back to more realistic margins and profits
On 17 May 2013 at 4:18 pm Jeff Royle said:
I've been saying this for months. The current crop of discounted products are purely Banks bashing each other and are not sustainable.
On 24 May 2013 at 3:34 pm Andy said:
Sorry Jeff - I hate to disagree, but the margins between OCR and rates now are the highest they have been in years. The banks have a bit of fat to play with. The floating rate should be around 4.5% now, and the long-term rates closer to 5.5% It seems the banks have pre-empted a housing bubble (and crash) by hiking up the margins to allow for losses from risky lending. The big banks have the profits to sit back and relax without playing the rate game, while those with little capital behind them are either offering discount rates, or changing tack and getting out of the housing market.

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 ▼7.09 ▲6.95
SBS Bank Special - 7.14 ▼6.49 ▲6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

Last updated: 12 June 2024 4:04pm

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