All the excitement last week centred on the National Bank cutting some of its rates which was portrayed as possibly the start of another price war.
In reality though the National Bank’s longer-term fixed rates were higher than its competitors and all it was doing was bringing itself into line with the market.
It cut its three, four and five year rates from 8.10% to 7.80%.
As we have commented previously there is a trend for the long-term fixed rates to come down due, not to competitive pressures, but because of what is happening in the United States market.
The most important home loan news last week came from the Reserve Bank governor Alan Bollard.
He took the unusual step of reiterating his comments made the previous week during the official cash rate review. His message was simple: Because of the strength of the New Zealand economy interest rates are unlikely to fall and could well head higher.
Bollard said that over the coming weeks the bank would be reviewing its forecasts in more detail, in particular to assess the strength of pipeline interest and exchange rate effects, household demand and ongoing labour market pressures.
'This assessment will be used to confirm whether further policy tightening is warranted at the June Monetary Policy Statement.
'Certainly, the current outlook offers no scope for an easing of policy in the foreseeable future.'
Coming back to what is on offer. There were no changes to any rates in either the floating or one-year space last week, and the only lender to move its two-year rate was AXA, which brought its rate down to 7.85%.
However National Bank and AXA cut their six-month rates to 7.80% and 7.95% respectively.
Nine lenders cut their rates for terms of three years or more. Besides the lenders already mentioned, Cairns Lockie, General Finance, Kiwibank, Premier, PSIS and the Public Trust lowered rates.
Currently floating home loan rates ranging from a low of 7.85% (Silver Fern) to a high of 9.25% (Headstart). However the range is very tight once the outliers are taken out of the equation. Under this scenario most floating rates are between 8.45% (New Zealand Mortgage Funds) and 9.05% (Westpac).
In the competitive two-year fixed rate market the range is much wider, with Kiwibank the lowest at 7.50% and NZ Mortgage Funds the highest at 8.45%. Most of the banks are offering two-year loans around the 7.80% mark.
In the three year market the lowest rate is Bank Direct’s 7.60% and the highest is NZ Mortgage Funds at 8.38%. Westpac has its capped rate slightly higher at 8.45%.
To compare home loan rates go to http://www.goodreturns.co.nz/section/200.html
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