A glimmer of hope for borrowers

The outlook for borrowers isn’t very good this year with high mortgage rates, however there is a slight glimmer of good news emerging.

Friday, February 1st 2008, 10:00AM

by The Landlord

The year started with the banks making reasonably significant increases to all their fixed rates, with rises of 20 basis points being the norm.

Added to that non-bank lenders made similar increases and have also pushed up floating rates too.

However, the past week has seen rates fall, particularly for longer duration terms such as five-years.

The falls are being driven by two factors; competition and cuts to the official cash rate in the United States.

While the falls are some relief for investors, the bad news is that rates are still sitting at historically high levels.

The most unusual move in the market during the past week was Bank of New Zealand, raising its floating rate and dropping fixed rates.

BNZ says the changes "reflect the higher cost of short term funding."

"The nature of the market has changed and these rate changes reflect the impact of higher short -term funding costs," BNZ general manager of strategy and marketing Blair Vernon says. "The 90-day bill rates are being driven by the combination of a higher OCR and market sentiment that suggests that it will stay elevated for some time."

As noted in the Daily Good Returns Mortgage Report, BNZ’s five-year rate started the week higher than other banks, but finishes at 8.89% versus the others at 8.95%. Kiwibank continues to have the lowest of the bank five-year rates at 8.75%.

« Rates up, up and awayHome loan report: Volatility abounds »

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