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Borrowers looking to longer terms thanks to Covid

The discovery of a new strain of Covid-19 is making home buyers even more cautions than they already were, according to a longstanding Auckland mortgage adviser.

Tuesday, November 30th 2021, 9:43AM

Bruce Patten of Loan Market says home buyers are locking in two or three year fixed mortgages for the sake of financial certainty.

His comments follow the discovery of the Covid variant, Omicron.

This brought an immediate halt to a significant chunk of international travel. It also sent world sharemarkets into a tumble and played havoc with wholesale interest rates.

This development came as uncertainty in New Zealand lingered on from last week's 25 basis point rise in the OCR. While that added to costs, many people had expected a 50 point rise.

Some retail rates had risen in anticipation of this higher rate than they should have done in retrospect, leaving them with a risky overhang.

There has been further uncertainty stemming from the fact that there will not be another OCR decision until late February, leaving home buyers having to bridge a longish spell of waiting, before another probable rise in the base rate will be announced.

This combination of factors means people are being especially careful, according to Patten.

“They were going for one year (mortgages) but they are now going for two or three year fixed mortgages,” Patten said.

“And it is probably split 50:50 between two and three years.”

And he blames volatility of wholesale interest rates, thanks to Omicron's bruising impact on world markets generally.

“With the sharemarket dropping, the wholesale swap rates also dropped.....by almost half a percent.

“But there are so many driving factors, there is no easy way to work out what is happening or which way they are likely to go, so most people are erring on the side of caution now.

“They are saying, I was paying six percent not so long ago, if I can lock in now a rate somewhere in the fours, then I will be happy with that.”  

A few people are paying more for longer term security, but their rate is higher. For home owners, two or three year mortgages are almost universal – and not one person is applying for a floating loan.

In a related comment, the ASB says the discovery of the Omicron variant proves the RBNZ was right to raise the OCR in cautious steps of 25 points, rather than going up by 50.

It says the discovery of the variant shows how quickly things can change, but it maintains its view that inflation dangers are considerable in New Zealand and the RBNZ still needs to act.

« Old company with a new nameRBNZ reviews banks' risks »

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans 6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 4.29 5.09 5.35
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - 4.19 - -
The Co-operative Bank - Owner Occ 5.45 4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 4.79 5.69 5.95
TSB Bank 5.59 5.14 ▼5.79 6.15
TSB Special 4.79 4.34 ▼4.99 5.35
Unity 5.65 4.80 5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

Last updated: 19 May 2022 10:42am

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