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Lending Institutions Continue To “Sit Tight”


REAL ESTATE INSTITUTE
MEDIA RELEASE
11 November 2002

Lending Institutions Continue To “Sit Tight”


Competition in the mortgage marketplace continues to be strongest in the fixed term category, according to the latest survey conducted by the Real Estate Institute of New Zealand this morning (Monday 11 November).

REINZ National Vice President, Howard Morley, said the survey showed floating rates for first mortgages offered by the 18 lending institutions surveyed sat in a reasonably tight band between 6.95 and 7.85 percent. All the major lending institutions are currently offering floating rate mortgages at 7.85 percent.

“Lending institutions traditionally lend at 1.5 – 2 percent above bank bill rate, and with the Official Cash Rate set by the Reserve Bank currently remaining unchanged at 5.75 percent, it would appear there is still room for lenders to drop their rates.

“However, despite the apparent remaining room for further manoeuvre downwards, this latest survey showed there has been virtually no movement in floating mortgage rates over the past month. Only one smaller lender dropped their floating rate – by 0.06 percent – since the October survey.”

The survey showed most competition in the fixed rate category, most noticeably downwards in the two year fixed rate mortgage category. Two year fixed rates ranged in a very tight band between 6.95 and 7.22 percent.

“There must be strong demand from home owners for two year fixed mortgages at the moment, as 14 of the 16 lenders who are currently offering this term dropped their rates during the month,” he commented.

“This is an interesting trend as, traditionally, long term money should be more expensive to fund than short term funds.

“However the mortgage marketplace is very competitive and lending institutions watch each other very carefully as they jockey for position – clearly they have decided that smaller margins are acceptable for this fixed term rate to obtain market share over the two year timeframe.”

The lowest rate currently on offer, a “honeymoon” rate, is 5.99 percent for a six month fixed term available from only one major lending institution. Other 6 month fixed rate mortgages sat between 6.75 and 6.95 percent. One year fixed rates are currently on offer between 6.85 and 7.25 percent, with more downwards movement again in the three year fixed rate term where eight lenders dropped their rates during the month to now sit between 7.10 and 7.40 percent.

“It would appear, with lending institutions happy to fix longer term money at a lower cost than their floating rate, there is still room for lenders to manoeuvre their floating rates downwards,” Mr Morley said.

- ends -


REINZ MORTGAGE INTEREST SURVEY AS AT 11 NOVEMBER 2002
LENDING INSTITUTIONS FLOATING (%) FIXED – 6 Mnth (%) FIXED – 1 Year (%) FIXED – 2 Year (%) FIXED – 3 Year (%) FIXED – 4 Year (%) FIXED – 5 Year (%) FINANCE RATE
(%) MAX VAL (%) TRANSFER MORT EARLY REPAYMENT PENALTY MAXIMUM TERM (Years) FRONT END FEE
ANZ 7.85 6.95 6.95 6.95 7.30 7.40 7.50 7.88 95¹ Yes Yes± 30 $0-$500 depending on amount
ASB 7.85 6.95 6.95 6.95 7.30 7.40 7.50 7.921 95 Yes Yes 30 Up to $500
AXA New Zealand 7.69 6.95 6.94 7.15 7.30 7.40 7.50 7.757 90 Yes Yes 25 Up to $500
Bank of New Zealand 7.85 5.99 6.95 6.95 7.25 7.39 7.49 7.8718 95 Yes Yes 30 Min $250-Max $500
Cairns Lockie Limited 7.50 - 6.85 7.22 7.39 - 7.71 7.57 95 Yes Yes ² 25 0.50%
Elders Home Loans 7.55 - 7.15 7.30 7.45 - 7.75 - 90 Yes Yes ³ 25 0.25%
General Finance Limited 7.85 - 7.25 7.30 7.45 - 7.80 7.92 95 Yes Yes ² 25 0.50%
HSBC 7.55 6.75 6.85 7.05 7.20 7.40 7.45 N/A 95 Yes Yes 25 Nil at present
Kiwibank 6.95 6.75 6.85 6.95 7.10 7.20 7.30 - 95 Yes Yes 30 Nil
NZ Guardian Trust 7.55 - 7.00 - 7.40 - - * 66.67 Yes Yes ² 20 1% negotiable
National Bank 7.80 6.95 6.95 6.95 7.25 7.40 7.50 7.84 95 Yes Yes 30 Up to $400
New Zealand Home Loans 7.70 6.95 6.95 6.95 7.30 - 7.50 7.75 90 Yes Yes 30 $250
Public Trust National Mortgage Unit 7.70 - 6.90 7.15 7.25 7.40 7.50 7.70 90 Yes Yes 25 Nil
Southland Building Society 7.65
6.75 6.95 6.95 7.35 - - 7.25 95 + No Yes 25 1% negotiable
Sovereign Limited 7.70 6.95 6.95 6.95 7.30 - 7.50 7.75 95 Yes Yes 30 Up to 1%
Tower Trust 7.80 - - - - - - 8.03 75 Yes No # 25 1% negotiable
TSB Bank 7.70 6.85 6.85 7.15 7.35 - - 7.75 80 Yes Yes 25 $400
Westpac 7.85 6.95 6.95 6.95 7.30 7.50 7.60 - 95 Yes Yes 30 Max $250
± if repaid in full during fixed term rate or for extra payments outside tolerance levels ¹ within certain geographic areas and property types ²Fixed rates only ³First three years *Subject to fee negotiated #with 30 days written notice +over 80% insurance required

The above information is intended as a guide only. Although the information is understood to be accurate at the date of publication, the Real Estate Institute does not itself, or on behalf of any named lending institution, represent that financial assistance will be available to any borrower on the terms noted.

All information © 2002 REINZ

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