Home buyers move to fixed rates
Borrowers stampeding into short-term fixed mortgage rates have done so in the nick of time, with rates now up across the board.
The Reserve Bank's mortgage figures for May show two-thirds of homeowners now have fixed loans.
That is a big increase from a year ago, when borrowers were evenly split between fixed and floating rates.
Most of those who have fixed have done so for terms of two years or less.
That means they have narrowly escaped the latest round of mortgage rate rises, which have targeted the shorter rates.
TSB Bank yesterday raised all its standard fixed rates up to three years by 10 to 20 basis points.
ANZ this week raised several short-term rates, joining major rivals ASB, Bank of New Zealand and Westpac.
The Reserve Bank's official cash rate (OCR) increase last month was a double whammy, prompting a wave of fixed-rate rises on top of the usual floating-rate increases.
That was because of the central bank surprising the market by sticking to its planned series of increases, sending wholesale interest rates higher.
In ASB's latest home-loan report, the bank's economists warn that floating mortgage rates and short-term fixed rates are likely to lift again soon, with another OCR rise expected this month.
While the attractive short-term deals are rapidly disappearing, some banks have reduced their longer-term fixed rates.
ANZ cut its four and five-year rates significantly, and eased its two-year rate slightly.
Westpac lowered its three-year rate to 6.69 per cent and kept its four-year rate unchanged.
Westpac lowered its standard five-year rate to 6.99 per cent, falling in line with ASB and BNZ.
The ASB economists said fixing for longer terms now would give extra protection if the OCR increases were stronger than expected.
"Depending on borrowers' risk appetite, that insurance may be worth taking," they said.
Floating rates were more expensive than many short-term fixed rates - up to two years in some cases, they said.
However, floating rates were still historically low and offered flexibility to borrowers.
THE BEST OFFERS
The best standard rates advertised are still dominated by the smaller locally owned banks:
Six months: 5.7 per cent – Kiwibank, HBS/SBS.
One year: 5.85 per cent – Kiwibank, HBS/SBS, TSB.
18 months: 5.99 per cent – HBS/SBS.
Two years: 5.99 per cent – HBS/SBS.
Three years: 6.25 per cent – BNZ, HBS/SBS, Co-operative Bank.
Four years: 6.75 per cent – Co-operative Bank.
Five years: 6.79 per cent – HBS/SBS.