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Mortgage Rates Daily Commentary
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Rise in households struggling with mortgage repayments; RBNZ: house prices still near top of sustainable levels

Mortgage arrears continue to rise but are still low by historical levels. [READ ON]

The Reserve Bank says house prices remain near the top of its estimate of sustainable levels and remain “a stretch” for many would-be buyers. [See here]

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Expect lower mortgage rates in six months: Stephens

Home loan interest rates are likely to be lower in six months’ time than they are today, Westpac’s chief economist says.

Monday, February 15th 2016, 6:00AM 2 Comments

by Susan Edmunds

Dominick Stephens is predicting a 50bps point cut in the official cash rate this year, probably in June.

He said that would mean floating rates were highly likely to fall and there was a good chance fixed rates would follow.

Cameron Bagrie, ANZ’s chief economist, agreed it was possible that mortgage rates would come down further. The major banks are currently advertising two-year specials as low as 4.49%.

But he said there was too much fixation on what the Reserve Bank was doing, forgetting the other factors that would drive home loan prices.

“At the end of the day, to be able to lend a dollar, banks have got to find a dollar. And it is costing more to attract those dollars.”

He said over the next three to four weeks, deposit rates could change a lot.

“If it becomes more expensive to raise money overseas, it is logical that they will go more aggressive to attract local deposits,” he said.

If that happened, mortgage rates might follow.  “But I don’t think the Reserve Bank wants borrowing rates to go up so if they see the funding cost pressure they might need to cut the official cash rate.”

He said he was not expecting an OCR cut but was “on notice”.

Stephens agreed funding pressure could cause a short-term increase in rates but said it was unlikely to last.

“When the penny drops and it becomes more obvious to others than an OCR cut is going to happen, the two-year swap rates will fall and we could see a wider spread between mortgage and swap rates.  In the short run [mortgage rates] might pop up a tiny bit higher but they will be lower in six months’ time than they are now.”

ASB is also predicting an OCR cut.  Chief economist Nick Tuffley predicts the OCR will stay at 2% until March 2018, lower for longer than the generally-held market view.

Tuffley said the ASB outlook was driven by prediction of ongoing weak inflation.

But he said there were a lot of “moving parts” that would determine how much of the low OCR would filter through to home loan rates.

He said there were potential ripple effects such as the rise in risk premiums in markets in which New Zealand secures foreign funding.

“Right here, right now, it’s hard to know the likelihood of any move.  If we do get some pretty substantial moves down in wholesale rates because of the Reserve Bank cutting then we are more likely to get dragged downward in mortgage rates.”

A potential question mark hovered over what the US Federal Reserve decided at its March meeting, he said. The market had price out any chance of an increase in the US cash rate over this year and most of next.

“If there was any Fed increase, because it’s not priced in, it would push US interest rates up sharply, which could have a knock-on effect in New Zealand as well.”

Tags: interest rates Mortgage Rates OCR OCR forecasts RBNZ

« ASB reports record halfDropping rates should boost slow growth »

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Comments from our readers

On 16 February 2016 at 3:30 pm ngyuanking said:
The market feels extremely bearish right now. What are interest rates trends in bear vs bull markets?
On 17 February 2016 at 9:40 am rockyb said:
In a bear market interest rates are kept low to encourage spending

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 ▼5.65 ▼5.55 ▼5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 ▼6.39 ▼6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - ▼6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 ▼5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.79 6.49 6.49
TSB Special 7.89 5.99 5.69 5.69
Unity ▼7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.50 ▼6.19 ▼5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.17 5.79 5.69

Last updated: 30 October 2024 9:36am

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