Otago Property Investors Association Inc
After months of little movement in home loan rates there has recently been a flurry of conflicting movements, making it a difficult time for people wanting to refinance or take out a new loan.
Most of the movement has been from the banks which first dropped their short-term fixed rates and left longer-term ones unchanged. Then they reversed the trend putting rate terms of three years or more down and shorter-term rates up.
The changes were brought about firstly through weaker economic data, but following the Budget a view developed that the government's spending plans were going to increase inflation, thus lengthening the time until home loan cuts came through.
While this situation has caused some confusion for borrowers, the most important piece of news to guide people was Thursday's official cash rate announcement from the Reserve Bank.
RBNZ governor Alan Bollard painted an economic picture, which if correct, means that rates are headed southwards.
"Provided the economy evolves in line with our projection, we are now likely to be in a position to lower the OCR later this year, which is sooner than previously envisaged."
This is some welcome relief to homeowners.
Currently most interest rates are at historical highs, particularly those for longer terms.
For people having to make a decision at the moment, this latest news adds weight to the idea of going for a shorter-term rate, say six months to 18 months and then refinancing at a lower rate in the future.
Naturally this strategy is based on the forecast unfolding as predicted. Rates coming down may be as soon as June or definitely by September, and continuing to fall after that. What potentially adds weight to this strategy is that the competitive action from banks is likely to return to the market, particularly in spring.
What's the best deal at the moment?
Often there is little difference between the standard rates from the banks, however that isn't the case at present.
Of the big banks and Kiwibank, there is an unusual trend. ASB and Kiwibank have pitched their standard short-term rates lower than their competitors, however their longer-term rates are higher.
For instance, for a one-year term ASB and Kiwibank are sitting at 9.40%, while BNZ is nine points higher at 9.49% and the others are at 9.80%.
In the popular two-year space, Kiwibank is on 9.19% and all the rest are on 9.40%, except BNZ which has its standard rate at 9.49% and its classic rate at 9.39%.
Out at five-years, ASB and Kiwibank are on 9.50% while the other banks are in a range of 9.29% to 9.35%.
These rates are likely to change over the next few days in response to the RBNZ announcement.
To keep up-to-date with changes and to compare rates, keep an eye on the Mortgage Centre.