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It's raining rate relief!

Thursday, May 15th 2008, 11:14AM 1 Comment

by Philip Macalister

A sudden and unexpected easing in home loan rates this week is to the property market, what a bit of rain is to drought-stricken farmers.

The past few days have seen rates in the shorter end of the interest rate curve fall quite significantly – up to 45 basis points in some cases – taking two-year rates down to the 9.40% mark.

While these are not cheap by historical standards, they are significantly better than what homeowners and buyers could have secured a couple of weeks ago.


One of the interesting things about the changes is that that for some time the five-year rates have been the cheapest in the market – and therefore appealing to many borrowers. These rates have remained static over the past week and now we are seeing shorter-term rates on par with longer-term ones, or in some cases lower.

While the falls are good news, they are just the first drops of rain in a struggling market.

There are still two major issues facing buyers. One is that banks are tightening their lending criteria – or more accurately, they have done the tightening and don't appear to have much intention of loosening things up. Secondly non-bank lenders are struggling, with more falling by the wayside in recent times.

I guess the big issue people are pondering is whether or not these interest rate falls will help stoke up the flame which has been burning under the housing market.

My guess is a muted yes.

For people who can meet the lending criteria or have cash on hand then they are likely to start getting more active.

Also astute buyers will know that it is not easy to pick the bottom of the market. To wait until prices are rising again maybe too late – well, too late to get the best bargain anyway.

As one real estate agent said: "It is very hard to judge the bottom of the market but most people will miss out on the real bargains as they will wait until the prices are going up and confidence returns before buying."
« All just a bunch of rose-tinted glasses?Rate cuts predicted, but beware »

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Comments from our readers

On 24 May 2008 at 2:38 pm Hamish said:
I think this market is a welcome relief for some. My personal view is that if you can afford to hold on to a property and you are claiming tax against it, don't get caught in the hype and start thinking about cashing up. Its not a good time to sell, don't forget this is a great country to live in and people want to move in here. I think we need to open our doors a little and things should get moving again.
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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 ▼7.45 ▼7.09 ▼6.95
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - ▼6.85 ▼6.49 ▼6.35
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 - ▼6.85 ▼6.49 ▼6.39
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 ▼7.45 ▼7.09 ▼6.99
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 - ▼6.59 - -
Co-operative Bank - Owner Occ 8.40 ▼6.79 ▼6.49 ▼6.35
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 ▼7.29 ▼6.99 ▼6.85
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 ▼6.69 ▼6.35 ▼6.15
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 ▼7.75 ▼7.39 ▼7.19
Kiwibank - Offset 8.50 - - -
Kiwibank Special - ▼6.85 ▼6.49 ▼6.39
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 - - -
SBS Bank 8.74 7.74 7.09 6.95
Lender Flt 1yr 2yr 3yr
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
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 -
Lender Flt 1yr 2yr 3yr
Westpac 8.64 7.49 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 6.89 6.75 6.39
Median 8.64 7.14 6.82 6.44

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