Last weeks Official Cash Rate review resulted in no change. Dr Bollard commented “We have cut the OCR by a large amount over the year. We expect the effects to pass through to more borrowers over coming quarters as existing fixed-rate mortgages come up for re-pricing. Although rising longer-term interest rates overseas are placing upward pressure on longer-term lending rates here, there is room for further reductions in shorter-term lending rates. ”
Home loan interest rates have been rising recently in the UK and the US and in the week leading up to the last announcement 3,4 and 5 year interest rates were increased here by the major players. The 5 year swap rate is currently around the 5.35% mark leading to 5 year fixed home loan interest rates around the 8% mark.
We are yet to see any reductions in shorter term interest rates.
To those who are still sitting on a floating rate it is time to reconsider your position. Your currently paying a premium to sit floating in the region of 1%. Even if the OCR was cut by a further 1% to 1.50% it looks exceptionally unlikely that the floating interest rate would drop down by equal measure to a current 6 month or 1 year fixed interest rate of 5.45%.
To remain floating you are either selling in the very near future or expecting another bout of financial armageddon shortly. 🙄
In positive news we may be seeing a slight thawing in credit criteria. Patrick has recently completed a transaction for first home buyers who had no deposit. He obtained a 1st mortgage to 80%, a 2nd mortgage of 15%, with the remaining 5% provided via a family gift.
Please get in touch if we can assist you in anyway. 😉