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Are sub-2% mortgages on the way?

Mortgage rates could fall below 2% as the government and Reserve Bank move to push down borrowing costs, according to a leading fund manager.

Tuesday, June 30th 2020, 6:09AM 1 Comment

Fergus McDonald

Nikko Asset Management's head of bonds and currency Fergus McDonald believes the concerted effort to lower interest rates will lead to even cheaper mortgages in the coming months.

Measures to boost liquidity, such as the Reserve Bank's LSAP programme, will push rates down, McDonald believes.

"I still think there will be a further round of mortgage rate cuts in New Zealand," McDonald said in a webinar. "The banks are awash with cash. They can borrow as much as they want really from the Reserve Bank at 25 basis points. It wouldn't be at all surprising to me if we have mortgage rates at some stage starting with a one."

The fixed income specialist predicts small business would benefit, with many SMEs using their home equity as security for business loans. 

"That will help the SME sector, and that would flow through to small and medium sized enterprises," McDonald added. 

McDonald says long-term interest rates will be dictated by unemployment levels. Unemployment is expected to rise to up to 10%.

He does not believe negative interest rates will be required, as the domestic economy shows signs of life after Covid-19.

The asset manager's comments come as economists predict an expansion of the Reserve Bank's Large Scale Asset Purchases (LSAP) programme, beyond its current cap of $60 billion. 

The RBNZ has hinted quantitative easing is its preferred method of pushing interest rates down, by boosting liquidity.

The increased liquidity would enable banks to lend more freely, and economists believe it will lead to downward pressure on interest rates. 

Last week, Kiwibank chief economist Jarrod Kerr told TMM Online the LSAP programme could double in size. "They haven't finished with LSAP yet, far from it. We think it could double to $120 billion, and we think we will get something towards that in August." 

 

Tags: Lending Mortgage Rates Nikko AM

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Comments from our readers

On 2 July 2020 at 11:43 am akuviren@gmail.com said:
Just wait until all the economic data for the second/ third/ fourth quarter for the FY 2021 is published ! I have strong feelings to suggest we would be having a zero in front of all interest rates in 2021 or earlier if the Banks are techno ready by December 2020 as per RBNZ mandate .

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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 - 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 - - -
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 6.65

Last updated: 18 July 2024 10:19am

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