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What's the best mortgage strategy?

As further official cash rate cuts look less likely, are borrowers better off choosing short or long-term loans? ANZ has released a new report on the the dilemma facing homeowners.

Friday, February 19th 2021, 9:15AM

Borrowers may be better off choosing longer mortgage terms if wholesale rates rise further, according to the lender.

In the big four bank's latest property focus, economists led by Sharon Zollner say borrowers looking for greater certainty may be better off locking in a longer-term deal.

It comes as wholesale rates creep up this year, with markets pricing in the reduced odds of further official cash rate cuts in 2021.

ANZ said it "started leaning in the direction" of longer-term rates last month, having noticed an increase in global long-term interest rates. Global rates are now between 80 and 120 basis points above November levels.

The bank's team said: "With the OCR on hold for the foreseeable future, we remain confident that borrowers will be able to enjoy low mortgage rates for some time. That’s because 1-2 year rates don’t typically move too far during periods of OCR stability, and banks are continuing to compete for business at the short end of the curve.

"However, borrowers who want to fix for a longer period in order to lock in some certainty may wish to look to longer-term fixes now, mindful that wholesale 4 to 5-year interest rates (the building blocks of 4 to 5-year mortgage rates) have risen sharply."

The lender's analysis will give food for thought to advisers and their clients ahead of the Reserve Bank's latest official cash rate decision next week.

Economists increasingly predict that the RBNZ will keep rates at current levels, and say that the OCR has troughed in this cycle. 

Tags: ANZ Lending OCR OCR forecasts

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.25 2.59 2.89
ANZ 4.44 2.85 3.19 3.49
ANZ Special - 2.25 2.59 2.89
ASB Back My Build 1.79 - - -
ASB Bank 4.45 2.25 2.59 2.89
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.25 2.55 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.85 3.15 3.39
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
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 2.95 3.45 -
Heartland Bank - Online ▼1.95 ▼1.85 2.35 2.45
Heretaunga Building Society 4.99 3.40 3.50 -
HSBC Premier 4.49 2.25 2.35 2.65
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.40 3.64
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.55 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 2.69 2.99 3.29
SBS Bank Special - 2.19 2.49 2.79
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.25 2.59 2.79
The Co-operative Bank - Standard 4.40 2.75 3.09 3.29
TSB Bank 5.34 3.05 3.29 3.59
TSB Special 4.54 2.25 2.49 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 2.85 3.19 3.49
Lender Flt 1yr 2yr 3yr
Westpac - Offset 4.59 - - -
Westpac Special - 2.25 2.59 2.89
Median 4.55 2.68 2.99 2.89

Last updated: 17 May 2021 9:05am

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