Spotting the right home loan rate

By Maria Scott

Last week’s Homeloan Report suggested that borrowers might consider shopping around among brokers as well as lenders because brokers were reporting different attitudes among lenders to discounting on advertised rates.

This drew a strong response from Wellington broker Finlay Abbot who said that discussions about up-front quotations on price over-simplified the process involved in obtaining a mortgage in today’s market. All prime lenders would match each other for quality business on spot rates. But too many brokers were seeking quoted prices for pre-approved loans.

“Almost without exception, all these spot rates are only valid for 48 hours so what is the point in wasting time on this?”

The swap market (which plays a large role in determining the cost of fixed rate loans) was changing on a daily basis. Brokers should seek spot rates once a client had purchased a property.

Meanwhile, for borrowers interested in the general direction of loan costs, there have been several increases in advertised rates over the last few days; BNZ has raised its standard two and three year rate by five and four basis points respectively and all of ANZ and National Bank have raised all rates by 10 points, except for five-year rates which have gone up by six points. Sovereign has increased its three and five-year rates by 5 points.

ANZ, in its latest economic report, says that the Reserve Bank is getting “minimal policy traction” in controlling the economy through interest rates because it did not raise rates last year when many homeowners were coming out of fixed rate loans that had been set in 2005.

"Interest rates will move up and if the Reserve Bank seeks to recapture the opportunity lost in October last year…they will certainly deliver a very hawkish statement to keep the market pricing in a subsequent move."

BNZ chief economist Tony Alexander has moderated his view on seven year rates – promoted by the bank.

He now says he would still be tempted to fix at seven years “being a conservative sort of person.”

“However, for the majority of people fixing two years at 8.17% is probably the optimal thing to do.”

BNZ has been criticised for promoting a seven-year rate.