The past week has been relatively quiet on the home loan front and it appears much of the attention is shifting to what the Reserve Bank will do it at its next official cash rate review on July 28.
Economists suggest that the chance of another rates hike is fading as weaker economic data comes in.
However there is also a view that the Reserve Bank will hang tough with its rhetoric. What makes the picture slightly more confusing is that lenders seem to be contradicting this view.
Floating and short-term rates are principally set off the central bank’s OCR. When it goes up floating rates invariably go up by the same amount. Likewise six-month and one year rates closely follow the OCR.
With no changes in the cash rate recently and a growing view that it will remain unchanged one wouldn’t expect much movement in short-term rates. However in the past week the main trend was for lenders to push these rates up.
Those to move include ASB Bank, and other organisations related to it (Sovereign, Bank Direct, NZ Home Loans and AA Financial).
Another trend which Good Returns has noted in past commentaries is for longer-term rates to fall.
In the past week this trend has again slowed with just a couple of lenders reducing rates in this area by around 10 basis points. Those to drop rates included ASB Bank, AXA and Bank Direct.
What’s the best option for people looking for home loan finance? Well it depends which camp you are in. Those who expect rates to start falling next year are suggesting that borrowers fix for 12 to 18 months, those with a more pessimistic view are suggesting that fixing for two to three years and locking in relatively cheap (historically) rates is the way to go.
One year rates range from 7.60% up to NZ Mortgage Funds’ 8.58%. Five providers are offering 7.60% including two Canterbury-based lenders, ABS Canterbury and SMC. The others are TSB Bank, Public Trust and Southern Cross.
Two year rates go from Kiwibank’s 7.35% to GEM Home Loans on 8.40% and three year rates range from 7.45% (BNZ and PSIS) up to 8.25%.
To compare home loan rates go to http://www.goodreturns.co.nz/section/200.html
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