tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Friday, June 21st, 6:39PM

Mortgages

Mortgage Rates Daily Commentary
Friday 21 June 2024  Add your comment
Resimac blind-sides advisers

Mortgage advisers have been blind-sided by Resimac's decision to essentially pull out of New Zealand. From July 1 it will no longer be accepting new business.

TMMOnline has attempted, unsuccessfully, to get more details from the company. In our story today we talk to Resimac's biggest and most loyal adviser Jeff Royle. He is not happy. [READ ON]

rss
Latest Headlines

Interest rates: A game of two halves

What did the Reserve Bank's Official Cash Rate announcement really mean? NZ Mortgage Magazine publisher Philip Macalister looks at what's happening and warns about focussing on just one part of the market.

Friday, July 26th 2013, 6:00AM

by Philip Macalister

With yesterday’s official cash rate announcement it is understandable that everyone is focussed on when the OCR will move.

But for borrowers that’s only part of the equation and it’s necessary to remember how the market works.

In its most basic form, short-term home loan rates, that’s anything out to 18 months or two years at a stretch, are priced off the OCR.

Looking at what the Reserve Bank is saying and trying to guess its moves and the market’s reaction is understandable.

However, longer terms rates, particularly three years or more, are priced off wholesale markets and these are heavily influenced by the United States economy. The news here is good and there is even talk that the US central bank, the Federal Reserve, will remove its economic stimulus package sooner than expected.

The impact of this for Kiwi borrowers is increasing interest rates and that is what we have been seeing for the past month or so.

We have passed the bottom of the cycle and it is now a move upwards. Borrowers understandably are switching from floating rates to longer-term home loan rates.

While two-year fixed rates have historically been a sweet spot for New Zealanders there is evidence that Kiwis are looking to fix rates around the three year mark.

The low point for a three-year rate was just above 5% and the peak around 10%.

Have a look at this graph.

It is ANZ’s three-year fixed rate from 2002 when Good Returns started collecting home loan rate data to today. The three-year rate is still below its average. We have plotted it against the OCR too, which shows the correlation between the two is low.

New factors to think about
In this economic cycle there is a new factor that borrowers need to think about. That is the decision by the Reserve Bank to use its new macroprudential tools to try and take the heat out of the housing market.

While the bank has yet to say how it plans to deploy these tools, bankers and borrowers are trying to guess what impact they will have.

One school of thought is that now the Reserve Bank has a new tool it may not have to increase interest rates as much as it did in the past to control the market. That means the peak of this next cycle may be lower than in previous cycles.

That could mean shorter-term rates will behave differently in this tightening cycle

Secondly if banks are restricted in the amount of lending they can do above the 80% LVR mark then there may be two distinct markets with a huge amount of competition for business where there is more than 20% equity in the deal.

Arguably one of the most important things to note at the moment is that banks are being most competitive in and around the one-year fixed rate market.

There is a good reason for this. Once they have locked you into this space borrowers are forced to take higher rates in subsequent years.

With this in mind it is worth considering very carefully longer-term rates.

There isn’t always a lot of certainty with interest rates but one thing which is a pretty safe bet is that they are only going to head one way. We have had the OCR sitting at its historic low point of 2.50% for years now and it will increase.

While longer-term fixed home loan rate increases are coming through almost daily now the days of cheap debt are disappearing. These rates are moving into the 6%-6.50% range. While increasing they are still low by historical standards.

To finish it is worth looking at yesterday’s OCR announcement to see what it means. While it had a consistent message with earlier statements the governor, Graeme Wheeler, made it clear the stimulus will get removed. It has been interpreted this maybe earlier than previously thought.

However it won’t rise this year.

« Hike 'may come sooner than expected'Kiwibank promotes offsets »

Special Offers

Comments from our readers

No comments yet

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
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: 20 June 2024 10:39am

Previous News

MORE NEWS»

News Bites
Compare Mortgage Rates
Compare
From
To
For

To graph multiple lenders, hold down Ctrl key while clicking in list box

Also compare rates to OCR
Find a Mortgage Broker

Add your company

Use map
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com