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Fix rates now bank urges

Dampening investor demand isn’t slowing the monthly pace of house price inflation, says ANZ’s latest Property Focus.

Wednesday, June 23rd 2021, 10:23AM

ANZ chief economist Sharon Zollner says this has come as a bit of a surprise and the bank has upgraded its near-term house price forecasts to include a little more momentum.

It has also brought forward the date it expects the Reserve Bank to start raising interest rates by six months to February next year.

“This means mortgage rates are expected to rise a little sooner than before, taking some of the steam out of the housing cycle a bit earlier,” says Zollner.

The report says housing data clearly shows the market is going through an adjustment period following the Government’s policy changes to tax deductibility and the bright-line test.

Exactly what things will look like when the dust settles remains uncertain, says Zollner.

But it’s not just house prices that have been on the up lately. Rent inflation is showing tentative signs of acceleration, with the 0.5% month-on-month in May the fastest monthly increase since March 2019.

“That’s following a few months of average to sub-par rental inflation, meaning the annual change is nothing spectacular, but higher-than-otherwise rents are an unfortunate side effect of the Government’s tax policy changes, but the magnitude of the impact is unclear,” says Zollner.

Interest rates

Rising interest rates will impact households’ ability to service mortgages and pull down spending in other areas.

The report says households’ debt serviceability looks like it will withstand 100 basis points or so of interest rate hikes, but all this debt accumulation means households are very susceptible to an income shock.

Household debt now stands at almost $310 billion compared to $159 billion in 2008.

“Even if higher debt servicing cost jumps aren’t a problem in terms of households being able to meet mortgage payments, they can still crimp discretionary spending and therefore have an impact on the likes of the hospitality sector,” says Zollner.

The report suggests householders start fixing mortgages on longer-term rates now.

“Appealing as lower short-term rates are, they don’t offer certainty for long,” says Zollner.

“We think that certainty is of greater-than-usual value at present and it is worth considering fixing for a longer term, even if it costs more.

“In short, simply selecting the cheapest rate now could work out to be more expensive in the long run,” says Zollner.

Tags: ANZ fixed rate mortgages Mortgage Rates mortgages

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.95 3.29
ANZ 4.44 3.10 3.50 3.84
ANZ Blueprint to Build 1.68 - - -
ANZ Special - 2.50 2.90 3.24
ASB Back My Build 1.79 - - -
ASB Bank 4.45 2.55 2.95 3.29
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.55 2.95 3.25
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 4.55 3.15 3.22 3.85
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 5.95 - - -
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 3.80 3.90 -
Lender Flt 1yr 2yr 3yr
HSBC Premier 4.49 2.19 2.45 2.69
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 ▲2.29 ▲2.69 ▲2.99
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.75 3.34 3.34 4.14
Kiwibank - Offset 3.75 - - -
Kiwibank Special 3.75 2.49 2.49 3.29
Liberty 5.69 - - -
Nelson Building Society 4.95 2.99 3.24 -
Lender Flt 1yr 2yr 3yr
Pepper Essential 4.79 - - -
Resimac 3.39 2.98 2.79 3.29
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 - 2.29 - -
The Co-operative Bank - Owner Occ 4.40 2.49 2.89 3.19
The Co-operative Bank - Standard 4.40 2.99 3.39 3.69
TSB Bank 5.34 3.30 3.69 4.04
TSB Special 4.54 2.50 2.89 3.24
Wairarapa Building Society 4.99 3.55 3.49 -
Lender Flt 1yr 2yr 3yr
Westpac 4.59 3.15 3.49 3.89
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.89 3.29
Median 4.54 2.68 2.99 3.29

Last updated: 29 July 2021 9:04am

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