ASB is the latest bank to drop their 4 and 5 year mortgage rates below 3%, joining BNZ and Westpac at 2.99% and it won't be long before the other banks follow suit. This move shows that the banks are aiming to lock their clients in for as long as possible as we head into uncertain times.
Rates are expected to drop further; if not by the end of the year, then by early 2021. The banks are now facing the reality that their clients are likely to shop around to take advantage of the low rates and cash contributions while they’re still around.
As banks do what they can to lock clients in for longer time periods, the break fees for exiting out of these fixed terms early will be a way to deter clients from moving switching lenders during the next five years.
So even though there is a drop in the long-term mortgage rates, the recommendation is still to consider the short term 1-year fixed interest rate first. This will allow more flexibility in yearly lump sum repayments and help with taking advantage of future drops in rates. Focusing on the short term will also keep the banks honest, with homeowners having the ability to play the field.