Mortgages

Rates up, up and away

Mortgage rates are continuing to rise. Even over five year-terms, rates from some lenders are now priced at well over 10%.

Wednesday, March 26th 2008

Pioneer Mortgage Services has just put its five-year rate up to 10.8%, where it is the highest in the market over this term. General manager Robert Redford said that this was a result of an increase in the cost of funding from one of Pioneer’s funder, AMS, part of the GE Money group. Redford predicted that other lenders financed by AMS – of which there are several in New Zealand – would have to follow suit.

Major banks are still charging well under 10% for five-year money but Redford said they may also have to catch up eventually.

Five-year fixed terms are among the least popular with borrowers and advisers although ANZ has recently suggested that having a portion of borrowing fixed over five years, with two-year terms taking precedence, would provide borrowers with a hedge against continued high rates.

There is an emerging view among economists that New Zealand’s official rate could drop swiftly from later this year – ANZ is predicting cuts from the September quarter, because the economy may slow sharply, but that rates will not drop to the low levels that were seen at the bottom of the last rate cycle. Worldwide, they say, inflation will remain a problem as economies struggle with the high cost of commodities and resources. New Zealand is no exception.

Tony Alexander, chief economist at BNZ describes inflation risks as “omnipresent” and predicts that when the Official Cash Rate begins to fall in New Zealand it may bottom out near 6.5% rather than previous lows near 4.5%. ASB says that short-term interest rates here will gradually decline to a point where they around 1% lower in 18 months’ time, but that at this level will still be well above average.

The overall message to borrowers is that we are entering a new economic phase where the cheap financing costs of recent years will be a sweet but distant memory.









Heartland Bank - Online 6.69
SBS FirstHome Combo 6.74
Wairarapa Building Society 6.95
Unity 6.99
Co-operative Bank - First Home Special 7.04
ICBC 7.05
China Construction Bank 7.09
BNZ - Classic 7.24
ASB Bank 7.24
ANZ Special 7.24
TSB Special 7.24
Unity First Home Buyer special 6.45
Heartland Bank - Online 6.45
China Construction Bank 6.75
TSB Special 6.75
ICBC 6.75
ANZ Special 6.79
ASB Bank 6.79
AIA - Go Home Loans 6.79
Kiwibank Special 6.79
BNZ - Classic 6.79
Unity 6.79
Westpac Special 6.39
China Construction Bank 6.40
ICBC 6.49
SBS Bank Special 6.55
Kiwibank Special 6.55
BNZ - Classic 6.55
Co-operative Bank - Owner Occ 6.55
ASB Bank 6.55
AIA - Go Home Loans 6.55
TSB Special 6.59
Kainga Ora 6.99
SBS FirstHome Combo 6.19
AIA - Back My Build 6.19
ANZ Blueprint to Build 7.39
Credit Union Auckland 7.70
ICBC 7.85
Heartland Bank - Online 7.99
Pepper Money Essential 8.29
Co-operative Bank - Owner Occ 8.40
Co-operative Bank - Standard 8.40
First Credit Union Standard 8.50
Kiwibank 8.50

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