The pressure on mortgage rates has finally shown with a range of lenders increasing their fixed rates in the past few days.
As Good Returns reported in its previous Weekly Report wholesale rates had been increasing, putting pressure on lenders to raise their rates or accept low margins on their offerings.
One of the key trends is that significant rate changes have been by banks, primarily the larger ones. Non-bank lenders have stayed out of the game at the moment.
ANZ led the market up, but they have been followed by Kiwibank, National and Westpac.
BNZ and Bank Direct has only raised five-year rates which appears to be a catch-up with the changes made earlier by its competitors.
The key two-year fixed rate has moved up and now ranges from 7.95% to 8.10%
All attention is focussed firmly on the Reserve Bank and what it will do with the official cash rate at its review next week.
The emerging consensus is that a rate hike is highly likely in a move designed to cool things done and put some pressure on bank home loan rates.
One economist noted this week that “strategically” the central bank has to move.
“If it doesn’t, the market is going to unwind some of the recent run-up in interest rates.”
It notes the raft of home loans due for refinance haven’t hit the rollover point yet. If the Reserve Bank doesn’t move in October it will miss this bubble.
“Waiting until December before acting means most of the maturity bubble the RBNZ has been focusing on will escape the impact of RBNZ action.”
What’s the best option at the moment? It still appears to be fixing for 18 months to two-years with the aim of refinancing at a much lower rate in 2008. The option of going for a five-year rate, which is the lowest fixed rate in the market, and just below its historical average is looking less appealing this week as rates have moved up.
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