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Long term fixed rates slashed

Twelve lenders dramatically reduced their long-term fixed rates between two to five years over the last week with four lenders dropping their five-year rate by more than 70 basis points.  

Thursday, July 8th 2010, 12:15PM

We have a graph showing the changes in five-year fixed rates over the last year, with current rates back where they were 12 months ago.

Kiwibank led the charge in dropping the two-year rate last Thursday, cutting it from 7.30% the median for all banks, to 6.99%. Most of the other banks followed suit and now the median for the banks has also dropped to 6.99%.

In news, the Reserve Bank of New Zealand should stop raising interest rates, amid worrying evidence that the economic recovery is stalling, says New Zealand Institute of Economic Research economist Shamubeel Eaqub.

In Expert Views BNZ economist Tony Alexander believes there's a risk with the patchy recovery that the Reserve Bank will not raise the cash rate as quickly as BNZ has pencilled in.

ANZ says fixed mortgage rates are lower, but the curve is still steep, making fixing still the more expensive option.

 

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Latest Trends
Fixed rates step into spotlight

The gap between floating rates and fixed rates is closing in. This is because floating rates have been increasing in synch with the last two Official Cash Rate (OCR) increases of 25 basis points, making an increase of 0.50% since June. At the same time there has also been a fall in two to five year fixed rates due to the decline in wholesale and swap rates.

Whereas six months ago the "step up" between floating and two-years fixed was around 1.60%, at the moment it stands at around 0.60%.

This means at the moment you would only need to see a small rise in rates for the fixing strategy to be the better option, especially for terms between one and two years.

 

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Disclaimer: Every possible effort has been made to keep the information in the rates tables as accurate as possible, however, neither the publishers of Mortgage Rates nor anyone engaged to compile these tables accept any liability for inaccuracies or any loss suffered as a result. It is strongly advised that readers check loan details directly with the provider concerned.

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