Tumultuous times continue for lenders

But the credit markets are still in turmoil as governments implement rescue packages for banks and official rates are only part of the story. Lenders and funders are making their own decisions about what they should charge and the cost of some lines of funding are still rising.

Rates over shorter terms from some lenders are still falling in New Zealand – reflecting the assumption that New Zealand’s official rate will be cut steeply again later this month – but over the past few days TSB Bank has raised two-year rates and Wizard has increased its one-year rate. Several non-bank lenders are no longer offering terms of beyond one year because of the cost and volatility of funds in this part of the market.

Meanwhile, lenders continue to tighten their criteria, effectively shutting out borrowers they consider to be risky. On the plus side, for low-risk borrowers, the cheapest deals are being pitched their way, such as the 7.99% over two years offered by Kiwibank to applicants who borrow no more than 80% of their property’s value.

Shorter term fixed rates would still seem to make the most sense for borrowers seeking funds at present. To check the cost of the latest floating and six month rates, go to GoodReturns.co.nz and click on the Mortgage Rates tab.