Banks have seen the cost of their wholesale funding stabilise over the last week after a period of sharp increases. This should result in a period of stability for mortgage rates which have been pushed up with the increased cost to the banks of funding fixed lending.
All of the major mortgage banks are now charging the same rates across all terms on standard homeloans.
The floating rate is at 9.80% while six-month, one-year and two-year terms are all at 8.90%. Over three years the mainstream banks are charging 8.80% while over four and five years rates have settled at 8.70% and 8.60% respectively.
Five year terms have become significantly less attractive to borrowers than they were a few weeks ago as rates have crept above historical averages. The market is watching Kiwibank which still has a rate of 7.99% over five years although it has raised rates on all other terms.
Non-bank lenders are still catching up with their mainstream competitors. Several have raised rates over recent days with particular pressure being put on the five-year terms.
Borrowers should remember, however, that the rates advertised by lenders are not necessarily what they will lend at. It has become commonplace for banks to negotiate individual rates to win business.
Economists and some lenders believe that the latest round of increases in the cost of fixed rate mortgages will have an impact on borrowers’ ability to fund property purchases and possibly confidence. This will suit the Reserve Bank because it wants to slow the housing market.
ANZ says that the increases in fixed lending have, in effect, delivered the impact of two 25 basis point increases in the official cash rate.
