The Current Financial Position – February 2021
Will Mortgage Rates Rise Or Not?
We all know that the low mortgage rates cannot last forever, but just how long will they last for?
There are two different opinions out in the market currently. Firstly, Reserve Bank Governor, Adrian Orr, is saying that lenders are not doing enough to pass on the benefits they are receiving from a low OCR.
“Orr said the central bank wanted to see its monetary policy support passed on. He set out a “clear message” for lenders.
“We are watching to see what their lending rates do. We’re aware there’s more than one source, there’s wholesale interest rates, deposit rates, but our Funding for Lending Programme provides that shadow opportunity for banks to have a low cost of funding, and that is to be seen to be passed on.”
“We believe there’s more work to be done around passing on interest rate benefits.” [source]
But, then on the other end of the spectrum, some lenders are already preparing for a rate increase.
“Westpac believes borrowers could be hit with higher mortgage rates by the end of the year.
“We expect that the longest-term fixed mortgage rates, such as five-year fixed, will start increasing quite soon. Two-year fixed mortgage rates are expected to start rising late this year or early next,” the team said.” [source]
While we can’t be sure what interest rates will do, we can be sure it is a moving target. So, if you are planning to make any financial moves, it is definitely recommended to take the advice of a financial adviser before committing to anything.
The Best Mortgage Strategy?
With the rise or fall of mortgage rates in question, what is the best strategy when it comes to your mortgage?
Should you be thinking about fixing short-term or long-term mortgage rates?
Well, ANZ has a bit of an answer for you, they have said: “With the OCR on hold for the foreseeable future, we remain confident that borrowers will be able to enjoy low mortgage rates for some time. That’s because 1-2 year rates don’t typically move too far during periods of OCR stability, and banks are continuing to compete for business at the short end of the curve.
“However, borrowers who want to fix for a longer period in order to lock in some certainty may wish to look to longer-term fixes now, mindful that wholesale 4 to 5-year interest rates (the building blocks of 4 to 5-year mortgage rates) have risen sharply.” [source]
The best idea is to chat with a financial adviser about what is the best move for your individual situation. We are happy to help you establish this information here at Mortgage Suite. Reach out to us today.
The Rise Of The New Build?
New Zealand has been in the grips of a housing crisis for a long time. Put quite simply, there are not enough houses in New Zealand for the people that need them.
The solution is, of course, to build more. And it seems that major lenders are in support of this plan. Advisers are beginning to see that the big four banks are becoming more receptive to construction loans.
“ASB is offering up to 85% LVR loans for all new builds, while the other big four banks are offering 90% for owner-occupied new builds, and 80% to investors building a home.
Anecdotal evidence suggests the banks are becoming more receptive as pressure mounts on policymakers to increase supply.
One adviser told TMM Online there had been “significant improvements from just two weeks ago” in the new build market, and believes lenders are under pressure from the RBNZ to grant more construction loans.” [source]
If you have been considering building as an investment or for your own home, then now could be a good time to find out more about your financial position.
Reach out to us at Mortgage Suite if you have questions about any of the above points, or if you would like to know how they could impact your own financial situation.