“There's more notice being paid to fixed rates than there was six months ago,” says Shane Crawford at Mike Pero Mortgages who won last year's mortgage broker of the year award for the Otago and Southland region.
Bruce Patten at Loan Market, who won the greater Auckland region award, says before Christmas about 75% of clients were chosing to stay on floating mortgages but now it's down to about 50%.
Paul Wang at Mortgage Success, who won the North Harbour/Northland region award, reports similar figures. Six months ago, about 70% of his clients were choosing to float but that number is now down to about 40%.
With “extremely good interest rates” now available for fixed terms, he personally recently fixed for one year at 5.45%, Wang says.
Officially, ANZ Bank is currently offering a 5.74% floating rate and a 5.79% two-year fixed rate while ASB Bank and Kiwibank are currently offering 6.10% for three-year fixed loans, the lowest in the market for that period.
Until late October, ANZ's two-year rate was 6.5% and ASB's three-year rate was 6.7%.
Patten says although wholesale interest rates have fallen somewhat, the trend downwards is being partly driven by more competitive banks. “They're hugely competitive at the moment, the banks. They're throwing huge amounts of money at people,” Patten says.
The banks are almost as competitive now as they were back in 2007 before the global financial crisis began, he says. The one major difference now from then is banks are still applying reasonably strict credit citeria.
Wholesale rates are helping, though. The two-year swap rate, from which two-year fixed mortgages are priced, dropped from 3.10% at the end of October to a low of 2.6% at the end of November and is currently sitting just below 2.9%, says Doug Steel, an economist at Bank of New Zealand.
A key question is whether either floating or fixed rates are likely to fall further from here.
Steel says barring a cut in the Reserve Bank's official cash rate – “it would have to get fairly nasty for that to happen” – floating rates aren't likely to go much lower.
Longer-term rates are more influenced by international markets.
With US 10-year government bonds already below 2% as a result of Federal Reserve policy aimed at stimulating the US economy and with the English and European central banks operating similar policy, it would be “a fairly difficult ask” to push longer-term interest rates much lower either, Steel says.
