In one week ASB’s 5 year fixed home loan interest rate has gone from 5.95% to 6.50%. This shows the vagaries of making interest rate predictions.
The 5 year swap rate, the cost to the Bank of borrowing funds for 5 years currently sits at 4.10% (the 10 year average by the way is 7%).
A lovely margin of 2.40%.
This is an example, as confirmed by the recent reporting season in Australia, that the major banks here have been increasing their margins.
The cut today of 1.50% has followed on from the 1.50% cut made in December. The Reserve Bank has moved rapidly to lower borrowing costs.
Westpac responded immediately and their home loan 3 year fixed rate now sits at 5.99%.
This has been trumped by ASB later in the day who are now 5.95% across the board from 6 months through to 5 years fixed.
While many of us are waiting, including your mortgage broker to see how low rates will go in an attempt to pick the bottom, those of a more conservative nature and dependant on personal circumstances, could be looking at locking in a portion of debt for the longer term now, with the remainder floating till the next Reserve Bank announcement on the 12th of March.
As always, get in touch to discuss your rate re fixing requirements. 😆
Merry Christmas to all. Thank you to our valued clients, lenders, and lender support staff.
Enjoy and we look forward to seeing you in the New Year.
Cheers from the team at Oregon.
The Reserve Bank today reduced the Official Cash Rate (OCR) from 6.5 percent to 5.0 percent.
The banks who have moved in advance of the cut the past couple of weeks are now likely to revisit their home loan interest rates, with further cuts to floating and short term fixed interest rates possible.
For the first time that i can remember the Governor also provided a stab at the banks with the following.
“To ensure the response we are seeking, we expect financial institutions to play their part in the economic adjustment process by passing on lower wholesale interest rates to their customers.”
The RBA in Australia has today cut rates by a full 1%. This is the 4th cut in as many months and equates to 3% in cuts since September.
CBA Bank, announced immediately they were passing on the full 1% to customers. CBA is the owner of ASB Bank, Sovereign and Bank Direct here in New Zealand.
Our Reserve Bank has some catching up to do and we are picking at least a 1% cut in our OCR on thursday.
With some economists picking a cut in the official cash rate on the 4th of December of as much as 1%, home loan interest rates have started to come down in anticipation.
Westpac lead the way yesterday with their 6 month fixed interest rate now at 7.65%.
ASB is following tomorrow with a 6 month fixed interest rate of 7.35%.
great news for mortgage holders :-0
9.15am 23/10/08 The Reserve Bank has slashed the official cash rate (OCR) this morning by a full 1%.
He has also indicated a bias towards further rate cuts going forward.
He noted “New Zealand can expect to face lower demand for exports and credit is likely to be less readily available”.
Under normal circumstances one would expect home loan Floating interest rates to drop by 1% forthwith.
Lets see what the Banks actually pass on to customers.
11.45am 23/10/08 ASB Bank has announced rate cuts across all fixed interest rates.
The most notable being 6 months fixed down from 9.25% to 7.99%.
Unusually there is no change to their floating interest rates though.
6.20pm ANZ has announced fixed interest rate declines. But also no change to their floating interest rates.
Westpac announced a floating interest rate decrease but no changes to fixed interest rates.
Kiwibank has cut their home loan interest rates across the board.
We expect some further jockeying for position over the next week amongst the banks.
5pm 24/10/08 ANZ have followed up today with full 1% cuts off floating and revolving credit interest rates.
The Reserve Bank of Australia has this afternoon cut its official cash rate by a full 1%. This was an unusually large move and unexpected by the market.
Our Reserve Bank has an OCR announcement on the 23rd of October. A rate cut here is now a certainty. By how much is the question. The reality is that NZ is officially in recession and as such it could be argued aggressive rate cuts are required here, as opposed to Aussie which is not officially in recession.
A smart move, to restore confidence in our markets, may have been to co-ordinate their forthcoming expected rate cut with Australia’s move today.
Interestingly Glen Stevens, the Aussie Reserve bank governor has been actively in the press in Australia recently applying public pressure on the banks to pass on the rate cuts to customers. Conversely here in NZ there is remarkable silence on the issue from anyone in a position of authority. Why.??
The July 24th rate cut here was not passed on at all to home loan customers.
In addition most revolving credit facilities (which i would expect would be the majority of floating interest rate loans in New Zealand) only received 0.25% of a cut from the 11th of September drop in the OCR of 0.50%. And further if your an existing customer with one of these facilities you are probably still waiting for this benefit as most of the banks haven’t passed this on immediately. ANZ for example is not applying the cut until the 10th of October for existing customers.
The bottom line is…if you have a home loan coming up for re-fixing in the near term, do nothing until after the 23rd of October. Floating interest rate rate adjustments will then be known quite quickly but it can take a few days after the announcement for drops in short term fixed interest rates to come through once the banks have jostled amongst themselves.
Due to current market conditions there have been a number of reductions in levels that lenders are prepared to lend to. It has mainly been with the “Low Doc” or “No Financials” variety of loans.
In addition “servicing criteria”, an applicants calculated ability to cover the monthly cost of a loan, has been tightening too.
Some, but not all, are as follows…
ASB low doc was 80% this changed last Friday to 60%, and we have just heard that as of today its now zero %…IE: no low docs!
UPDATE 3.30pm ASB is restricting all housing lending for new customers to 80%
Westpac low doc was 85% now 65%
In addition some lenders are showing reluctance to lend on apartments, unsurprisingly given the recent waves of negative publicity.
Sovereign, a lender we have regularly used for apartments in the past, won’t currently lend anything on an apartment in a building with more than 3 floors.
Kiwibank is also not doing low doc loans on apartments.
Still a round of tax cuts went into your paycheck on the 1st of October, so it isn’t all bad. 😆
Welcome to the website of Oregon Financial Services Ltd. Our intention is to post regularly here on the blog on a range of relevant financial topics.We welcome your feedback and discussion.
We’ve tried to make the site brief as everyone’s circumstances are different and our approach will be tailored to your requirements. We have arranged finance on properties from Houhora to Bluff, and our clients are spread throughout New Zealand and around the world, so your location doesn’t matter.The Contact page has our details and you’re welcome to pick up the phone and let’s talk.
Welcome and Enjoy.
Cheers from the Oregon team.