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Expectation of Nov rate cuts prompts record short rate borrowing

Borrowers taking out mortgages for six months rose to a new high in May, in anticipation of interest rate cuts soon.

Wednesday, July 10th 2024, 10:19AM

Most banks now predict the Reserve Bank will start cutting the OCR from November as the economy continues to stall, unemployment rises and inflation falls back within the 1-3% band. 

The latest RBNZ fixed rate term duration figures show the share of mortgages on six-month fixed terms borrowed by owner-occupiers rose to a new historical high of 17.1%, which equates to about one in six mortgages.

Compared to last year, when mortgages on six-month terms was at just 3.4%, this increase gives a sharp indication of borrowers’ thoughts on where they believe interest rate increases are going – down in the not too distant future.

The RBNZ is not predicting a drop until mid-next year, but the finance markets have a November cut already fully priced in, with a 50-50 chance of a cut in October.  

Investor borrowing on six-month terms rose from 18.7% in April to 21.7% in May - about one in five mortgages. 

While those figures hit historical highs, the one-year fixed term is the most popular for all borrowers. This term accounted for 36.5% of all new owner-occupier lending, but down from 39.4% in April.

It is the same story for investor borrowing, with one-year terms making up 40.2% of new lending, however that was down from 45% in April.

Overall total mortgage lending was $7.1 billion, up 18.5% from $6b in April and compared to the same month last year, up 22.8% from $5.8b.

The share of total new residential lending on fixed interest rate terms rose to 82.3%, up from 81.9% in April.

Owner-occupier lending increased to $5.2b in May, while investor mortgage lending rose to $1.8b.

On terms above 18-months, owner occupier lending was steady. For example, the share of two-year fixed mortgages rose to 8.8% from 8.6% in April, and the share of three-year fixed terms increased to 3.1% from 2.8%, while four-year fixed terms held steady and are at a historical low at 0.3%.

Owner occupier loans on floating terms are dropping, from 17.7% in April to 17.1% in May.

Investors’ share of 18-month terms increased from 8.9% in April to 11.9% in May, whereas two-year fixed terms declined from 7.8% to 5.9%.

Of the subcategories of commercial property lending, investment property dropped by $72 million (13.2%) to $473m.

Commercial property development rose by $86m (97.7%) to $174m, however, residential property development reported a 2% decline from $98m in April to $96m in May.

Tags: RBNZ

« Reserve Bank expected to stick to its knittingBREAKING: OCR 5.50% - Inflation Approaching Target Range »

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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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