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Short term the cheapest option over next five years: ASB

Rolling short-term mortgages could be the cheapest option for borrowers over the next five years, according to analysis from ASB.

Thursday, December 12th 2019, 12:07AM

The bank's economists suggest the "tick shaped" borrowing curve – with cheaper 1 to 3 year rates – means borrowers will be better off taking out shorter-term loans than opting for longer-term financing over the next five years.

While the mortgage borrowing curve is flatter than historical averages, 1 and 2 year loans are 0.85% cheaper than 5 year rates, the bank says. The lender does not believe mortgage rates will go much lower in this cycle, with upward pressure on fixed rates and the reduced chance of large cuts to the official cash rate next year.

The bank's economists, including Nick Tuffley, said: "While the future is inherently uncertain, our forecasts for carded rates suggest fixing at the lowest rates on offer then subsequently rolling short terms (eg 1 or 2-year fixed rates) is likely to be the cheapest option over a 5-year time horizon."

The bank believes the OCR will only be cut "one more time" in 2020.

"Mortgage interest rates could potentially move lower still, but we note that they could also move higher," the bank's economists said.

Longer fixed rate terms could move higher than current levels over the next couple of years: "At this juncture our forecasts (assuming the RBNZ cuts the OCR) suggest floating and the six-month mortgage rates could dip slightly lower over the year ahead, but the longer fixed terms risk moving higher than today’s levels over the coming one to two years."

 

Tags: ASB

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 ▼2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 ▼3.15 3.29 ▼3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 5.50 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.55 2.65 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac ▼3.39 3.45 ▼2.99 ▼3.35
SBS Bank 4.54 3.09 3.19 3.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.59 2.69 2.99
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.99
The Co-operative Bank - Standard 4.40 3.05 3.19 3.49
TSB Bank 5.34 3.35 3.49 3.79
TSB Special 4.54 2.55 2.69 2.99
Wairarapa Building Society 4.99 3.65 3.69 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.12 3.19 3.17

Last updated: 4 August 2020 11:33am

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