We’re probably at the peak of the interest rate cycle for borrowers after the central bank’s latest decision, but no-one should anticipate an official easing anytime soon.
Floating rates are likely to be stable around current levels for at least the first half of the year, but the competition for borrowers’ custom as millions of dollars of fixed rates roll over this year is seeing constant downward pressure on fixed rates.
The competition will continue for the foreseeable future.
There were lots of changes to lower offerings over the week. The major banks are fighting it out in the medium-term fixed rates, but now the second-tier banks have engaged in the battle for borrowers, with many of them taking two- and three-year rates below the 8% mark.
An easing in the swap rate – which shows the cost of borrowing for banks to lend – recently is making it simpler for lenders to jump on the lower fixed rate bandwagon.
So a large number of non-bank lenders have also been able to move into the battlefield and cut fixed rates.
BNZ again began this week dropping some rates, trimming its standard two-, three- and four-year rates.
It is also pushing its seven-year fixed rate for those borrowers whose need for payment certainty stretches way out into the distant horizon when it’s anybody’s guess what the floating rate could be doing.
Already this week ASB, BankDirect and Sovereign decreased rates in the three- and five-year space. BankDirect also cut its two-year rate.
Last week HSBC moved its fixed rates down, expect for its six-month rate, which increased.
Superbank and TSB also lowered rates. TSB now has all rates of two-years or longer under 8%.
Non-bank lenders to follow the downward trend in the last week in the two- and three-year market included Argosy, Asteron, GEM, Pacific Home Loans, Premier, Tasman, United, Wizard, Equitable, NZ Finance, Pioneer and ABS Canterbury. Pioneer also dropped its four-year rate.
Separately, ABS has changed its name to CBS Canterbury to “reinforce the society’s strategy to provide innovative and modern banking products and services across the Canterbury region,” chairman Graham Kennedy said.
Variable rates still start at the 8.50% offered by Napier Building Society and spread to the 9.75% recorded by Headstart.
One-year rates remain between the 7.60% offered by Southern Cross to 9.10% from GEM Home Loans.
Two-year fixed terms continue to be stacked between the 7.75% offered by Southern Cross to 9.25% from Headstart.
Three-year rates still vary between Kiwibank’s 7.7% and Headstart’s 9.15%.
In the four-year part of the market, rates are now hemmed in an even more narrow range between 7.95% offered by Loan Plan, Kiwibank, ASB, HSBC, and Superbank to 8.25% from Pioneer.
For five years, rates differ between the 7.75% offered by BankDirect, NZ Home Loans and Sovereign to Gem Home Loans’ 8.65%.
