After a period of strong rises in home loan rates they are now starting to ease back, and by reasonably significant margins.
The trend started at the end of last with ASB Bank and its two related companies easing their mid-term fixed rates. They have been joined today by Bank of New Zealand which has lowered all its fixed rates, and some such as the two-year rate by 20 basis points.
The trigger for this easing comes from downward pressure on wholesale interest rates largely driven by weaker than expected gross domestic product numbers in the United States.
In New Zealand there is little expectation that the Reserve Bank will increase its official cash rate again in this cycle and two-year swap rates have fallen back from 7.47% a couple of weeks ago to be sitting around the 7.20% mark.
This has meant the margin for lenders has been increasing and some banks are choosing to react by lowering their home loan rates.
There are still differences between economists on what is the best option for a new home loan or refinance. BNZ is suggesting people go for three years, while Westpac is suggesting borrowers go short with a term of 18-months. ANZ is pushing the concept of loan splitting and ASB says that the '2-year fixed rate appears to offer a reasonable mix of interest rate protection in the near-term and opportunity in the medium-term.'
Also some differences are emerging in rate hold policies. ANZ has recently lengthened the amount of time it will hold a rate for a customer while HSBC have shortened its term.
It has reduced its rate hold period from 35 days to 14 days and decided that if a customer wants to extend the hold period beyond 14 days they will charge an upfront fee of 0.20%.
The two main trends continue; that is floating rates are fixed solidly in the same position they have been for months. The second is that longer term fixed rates are lower then shorter term ones.
Floating or variable rates range from 8.50% through to 9.95% with the banks sitting at the top end of the range on 9.55%.
Of the three fixed rate categories surveyed in this week’s report Southern Cross Building Society comes out with the lowest rates in all groups. It is unusual for one lend to be the lowest across the board.
Its one year rate, at 7.85% is 15 basis points lower than the next on the table. The highest rate is GEM Home Loans at 9.00%. Amongst the banks BNZ’s standard loan is the highest at 8.60% while many of its competitors are around the 8.40% mark.
In two-year fixed we have Southern Cross at 7.75% and quite a few lenders under 8.00%. Banks though are clustered at 8.30%.
In three-year fixed Southern Cross is again 15 basis points lower than its nearest competitor at 7.65% and there are 17 lenders under the 8.00% barrier.
To compare rates and see what is on offer go to Good Returns comprehensive rates table http://www.goodreturns.co.nz/section/200.html
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