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Mortgage Rates Margins Continue To Tighten


Margins Between Mortgage Rates Continue To Tighten

Lending institutions continue to trend mortgage rates on offer downwards according to the latest Mortgage Survey conducted by the Real Estate Institute of New Zealand at 9 am today (10 October).

Although only one third of the 18 institutions surveyed had lowered their floating rates during the month, the “lowering” effect was far more marked on longer term fixed term rates with most lenders moving downwards.

REINZ president, Graeme Woodley, said there was still plenty of room for lenders to manoeuvre.

“Lending institutions traditionally lend at 1.5 – 2 percent margin above bank bill rate. With Dr Bollard leaving the Official Cash Rate at 5.75 percent last week, we believe there is still room for rates to come down further.

“Over the last decade or more, since we’ve been undertaking the Mortgage Survey, we’ve noted a reluctance by lenders to move downwards relative to the cost of funds.”

As at this morning, floating rates ranged in a tight band between 6.95 – 7.85 percent.

“Although one new entrant to the market recently came in with loans as low as 6.95 percent, it would appear no other lender has seen a need to move down to meet them,” Mr Woodley said.

“Interestingly, although three other lending institutions are now offering floating rates for first mortgages at 7.55 percent, none of the major banks moved their floating rates during the month.”

For fixed terms, however, all but one lending institution lowered one year rates in the past month. These currently range between 6.75 – 7.25 percent with many moving .30 percentage points down (in September one year rates on offer ranged between 7.05 – 7.25 percent). Similarly two year rates were trimmed to range between 7.10 – 7.45 percent. Five year fixed rates also fell within a very tight band of 7.4 – 7.75 percent.

“If you look at longer term fixed rates, the outlook for homeowners is good – especially when lenders can currently offer five year rates at prices lower than their floating rate.”

Mr Woodley urged anyone considering changing their mortgages to take advantage of these lower long term rates to seek professional advice.

“With pressure on overseas economies mounting, and with our relatively healthy New Zealand economy at present, it appears we can anticipate stability in the mortgage market for some time to come.”

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