Official Cash Rate Unchanged

Alan Bollard left the Official Cash Rate unchanged this morning.  He commented as follows..

“”If the economy continues to recover, conditions may support beginning to remove monetary stimulus around the middle of 2010. Recent tightening in financial conditions, driven by a higher exchange rate, increased long-term interest rates and a wider gap between the OCR and bank funding costs, reduces the need for more immediate action.””

No Change to Official Cash Rate

The OCR was left unchanged at 2.50% today. The Reserve Bank Governor went on the attack in an attempt to hammer down the NZ dollar and to press interest rate market players to reduce their expectations that the OCR would be raised in the very near future.

“In contrast to current market pricing, we see no urgency to begin withdrawing monetary policy stimulus, and we expect to keep the OCR at the current level until the second half of 2010.”

He managed to obtain both, although for how long remains to be seen. The dollar was down against most of our trading partners and interest rate swaps were also down. At the time of writing the 1 year fixed interest rate swap was down from 3.59% to 3.47% and the 2 year from 4.68% to 4.52%.

The ASB Bank, in a market commentary released this afternoon, is forecasting the first OCR rate hike to occur in April 2010. They have indicated an expectation that the 1st 3 increases will be moves of 0.50%. Based on this one could expect very rapid rises in home loan floating interest rates next year.

BNZ and ANZ have announced their annual results over the past two days. They make for some interesting reading (for a slightly sceptical mortgage broker ;-)) once you ignore the headline figure. 

The ANZ Chief Executive has been quoted as saying the decrease in net interest margins was as a result of “….intense deposit competition and higher wholesale funding costs, as well as the timing lag in re-pricing fixed rate lending and the increased costs from early repayments of fixed rate mortgages”.

Her boss in Australia had a slightly different take. “We have a great NZ franchise but banks in NZ seem to be doing their best to price themselves out of business and the regulators seem intense on finishing the job.”,28124,26276257-36418,00.html


Home Loan Fixed Interest Rates on the Rise

ANZ Bank, the largest lender in the country, by virtue of its ownership of The National Bank, raised home loan fixed interest rates this week. The increases were hefty with 1 year fixed up 0.45% to 5.95%, 18 months fixed up 0.40% to 6.49% and 2 years fixed up 0.44% to 6.99%.

Today the 1 year swap rate is at 3.52% and the 2 year swap rate is at 4.37%.

The 2 year home loan fixed interest rate at 6.99% less the 2 year swap rate of 4.37% leads to a margin of 2.62%. Its from this margin that the bank covers some of its expenses, some of its profits, and reflects the costs of borrowing a proportion of its required funds offshore.

With home loan fixed interest rates on the rise over the past 5 months we have found ourselves making extensive use of fixed interest rate lock agreements.

Get in touch for further information.

Official Cash Rate again left unchanged

The Reserve Bank today left the Official Cash Rate unchanged at 2.50%. The Governor reiterated earlier comments around a desire to keep it at or below this level through to the latter part of 2010. He noted a pickup in the housing market over recent months evidence of which we have seen ourselves.

At auction yesterday we witnessed a freehold bare section of 450 sqm in Curran St, Herne Bay, Auckland, sell under the hammer for $850,000.!

In interest rate news the ASB and Sovereign moved last week to cut their home loan floating interest rate to 5.75% while at the same time raising all fixed interest rates of 1 year duration and longer. Their 5 year fixed interest rate now sits at a reasonably ugly 8.60%.

Official Cash Rate left unchanged

Alan Bollard left the OCR, the level of wholesale overnight interest rates,unchanged at his announcement  last Thursday. His main comments were in relation to the $NZ and he has left the door open for further OCR cuts if the dollar won’t drop of its own accord.

As a result we have seen no movements in home loan interest rates.

Borrowers are currently faced with a trade off between the lowest borrowing costs possible, a 6 month or 12 month fixed interest rate, and higher longer term fixed interest rates that provide some piece of mind.

If your one who is taking the cheapest option, we suggest that if you have the capacity, you increase the repayments over and above the minimum required. Additional repayments come straight off your loan amount which in turn can save you considerable sums in interest going forward. Use these current very low home loan interest rates to get ahead of the curve on your home loan.

We were amazed to see the National Australia Bank, the decision maker for the BNZ, drop its dishonour fee’s on overdrawn transaction and savings accounts for personal banking customers. A move which has been followed today by Westpac albeit slightly modified.

On Aussie telly we watched a spokeswoman indicate that the cost to the NAB was some AU$100 million per annum. It was disclosed however that part of the reason for doing so was the bank averaged 5,000 complaints a month from customers voicing their displeasure over the fee’s. Looks like they’ll save alot of money from not having staff tied up with complaints….

Official Cash Rate unchanged

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. 😉

Official Cash Rate cut to 2.50%

The Official Cash Rate was cut by 50 basis points last Thursday to 2.50%.

To date the only Bank movement on home loan interest rates that we have seen is Westpac’s cut of 40 basis points to its 6 month fixed interest rate. This now stands at 5.39%.

The cut was accompanied by some strong wording from the Governor, including..”We expect to keep the OCR at or below the current level through until the later part of 2010″. This was done in part to try and jawbone the interest rate markets down following on from his displeasure at the extensive rises in long term fixed interest rates.

Late last week the 2 year swap rate was at 3.44%. The 5 year swap rate was at 4.65%, a reduction from the previous week.

We shall patiently wait for any movements to flow through to the home loan interest rate market.

Update 11 May 2009.

Anz and National, who are effectively one and the same, have reduced their 6 month fixed interest rate by 0.34% to 5.45%. Their 1 year fixed interest rate is down to 5.50%  In addition they have a cheeky wee number in the form of a 3 month fixed interest rate of 5.35%.

And that folks, looks to be our lot, from the last Official Cash Rate reduction. 👿


Something to consider for borrowers coming off fixed interest rates currently is to roll onto a 6 month fixed interest rate @ 5.50% but maintain your monthly repayments at the same level as what they were prior to the re fix.

This would mean your getting the lowest interest rate possible currently and that more of your monthly repayment is going towards the reduction of the amount of your loan that is outstanding. That is assuming of course that you are managing with your existing repayments.


5 Year Swap Rates Decline

The 5 year swap rate has declined to 4.78%.  This is down from 5.12%  only 4 weeks ago and 5.03% last week.

The swap rates are the cost to the banks of borrowing funds for a fixed period. A margin is added to this, which is then what the mortgage holder obtains.

The majority of 5 year fixed rates are currently around the 7.50% level.

So despite a decrease in the cost to your bank of 5 year money recently, there has been no decrease in cost to the customer.


An anouncement from the Reserve Bank on the Official Cash Rate is due on the 30th of this month. We are expecting a cut of 0.50% with some reasonably strong wording around the banking system passing on the cuts to customers and statements that interest rates could remain low for some time yet.  This could jolt some further decreases in swap rates with hopefully lower home loan interest rates for customers.

If your considering re fixing your home loan at present, we suggest you wait until after the Reserve Bank announcement.

Another Official Cash Rate Cut

The Reserve Bank announced a further cut to the OCR of 0.50% taking us down to 3%. Further good news for those with mortgages.

We noted 2 months ago the ASB’s home loan 5 year fixed interest rate at 5.95%, and that one should be considering locking some debt in at that rate.  We had hoped that the ASB move would have pulled the other Banks down to similar levels. This did not eventuate and subsequently ASB raised their home loan 5 year fixed interest rate twice. It now sits at an above market 6.75%.

As a result, we have increasingly come to the view that now is that time to be locking in some long term debt. The 5 year swap rate market seems to have stalled somewhat, after falling off a cliff the past few months. Banks are aware that there is a large chunk of the market that have recently come off fixed interest rates who have been holding off re fixing in an attempt to pick the bottom which leads us to suspect that they may not have a desire to discount these long rates. We suspect also that recent tightening of credit criteria is limiting home refinance activities,(the movement from one bank to another) thereby reducing competition. In addition, lenders are facing increases in their cost of obtaining funds to lend in the form of, increased margins on funds from offshore, the fee for using the government guarantee, and rising deposit rates here in NZ.

As such home owners, who have no intention of selling in the near future, could lock in half their floating mortgage debt now to a long term fixed interest rate, safe in the knowledge that they have received a historically good home loan rate. This allows the possibility of fixing additional debt in the near future if rates were to fall further, and has an added benefit in that you have now split your mortgage, so that regardless of future interest rate moves, not all of the mortgage will come up for renewal on the same day. This protects you from all of your loan rolling onto a substancially higher interest rate on one day in the future, and having to take, that interest rate on the day.  As independent brokers we are always working towards your future.

If your lender provides a no cost “rate lock facility”, then one could secure the interest rate now for implementation in 60 days time. Given that Floating home loan interest rates are now below the 5 year fixed rate , you’ll eke out a few days on a lower interest rate, but with the certainty of a long term fixed interest rate coming shortly.

Our caveat is that further worldwide financial deterioration, raising the possibility of the US Government printing money, forcing up the price of long dated bonds, and thereby providing for a cheaper borrowing cost to our banks for the money they require from offshore.  However if one is glued 24/7 to CNBC waiting for this to happen then you’ll be ignoring what i say anyway. 😉

We note the silence of Kiwibank, who has up until now, been very quick and vocal in leading the way with rate cuts.

As always, get in touch to talk through your re fixing requirements.

UPDATE: 24/3/2009  Well low and behold a couple of days after our post The Fed did announce the crank up of the printing press.  This is the creation of paper money (actually they are doing it electronically) to increase banks capital with a hope of them increasing their lending. The word we received 2 days ago from someone trading the treasury markets was that this had merely stalled the rise in the 5 year swap rate yield curve.

The feedback we have received from the Banks over the past few days is that there are a lot of customers who have been re fixing their mortgages at the long term interest rates prior to the cutoff period for the recent rises in 3,4 and 5 year fixed interest rates. This adds pressure on these long terms rates due to demand.

The overnight rise in the DOW of 500 points on the back of a  US Treasury announcement to facilitate the buy up of a $US1 trillion of toxic assets has today added 0.11% onto our 5 year swap rate.  This is due to investors taking their money from the perceived “safety” of the bond market (ie: selling bonds and treasuries, leading to rises in interest rate yields) and moving their capital into more “risky” assets such as stocks.

Long term interest rates are to a large extent based on peoples expectations of the future, which helps to explain why these rates are rising now, despite the here and now in NZ commentary, remaining a little gloomy. “The market” is currently believing prospects for the future may be looking rosier.

We remain comfortable with the strategy of locking in some long term debt now dependant on individual circumstances.

UPDATE:30/3/2009  How rapidly rates have changed.!! There have been substancial moves in the 3,4 and 5 year fixed interest rates.  Market demand has driven these up so rapidly that the ASB (as an example) raised their rates on Thursday only to raise them again on Friday night. The 5 year rate now sits at 7.50% and the 3 year rate is now 6.75%.  The sudden and dramatic move in the 5 year rate has been sufficient to now make us question locking in this rate currently. We prefer a wait and see approach now. We suspect the Reserve Bank will not be overly happy about such sharp increases in borrowing costs, leaving open the possibility of a “market” jolting move or wording come their next OCR announcement on the 30th of April.

ASB raises long dated home loan fixed interest rates

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.


PH: 0800 2 FINANCE. Auckland Based Mortgage and Insurance Assistance Since 2002