Fixed mortgages gaining in popularity
The banks' battle to hook mortgage customers with attractive fixed-rate deals has begun to pay off, with Kiwis gradually swinging away from floating home loans.
New Reserve Bank data shows the trend towards fixed rates continued to gather momentum in June.
Floating mortgages made up $104 billion or 60 per cent of the mortgage market during the month, compared with their peak of $109 billion, or 63 per cent, in April.
The move towards fixed was first seen in May which was the first month since August last year that the total value of floating mortgages decreased.
Floating rates have been gathering dust at around 5.75 per cent for months, in contrast to the hotly contested fixed term market which has seen big discounts and deals.
Several banks' six-month and one-year fixed terms now undercut the floating rate, which is unlikely to move until the closely-tied Official Cash Rate budges from its historic low at 2.5 per cent. This is not expected to happen until well into next year.
The Reserve Bank data shows the most popular fixed loans continue to be shorter terms of six months to two years, with modest growth in longer three to five-year options.
Yesterday Westpac economists said the balance of risk favoured fixing, which was still attractive compared with where floating rates might head in coming years.
"Even though floating rates are not expected to change for a long while yet, fixed rates could rise sooner. In fact, one or two rates have already risen off their lows."
June was also a big month for household and business borrowing, with total household debt up 1.8 per cent, the fastest rise since October 2010.
However, Infometrics economists said that growth was below historic levels and they expected it to remain there until at least halfway through next year.
Quarterly growth in household debt was still well below the 2.1 per cent average over the past decade and only barely above the rate of inflation, they said.