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Fixed rates continue to trend downwards

Fixed rates continue to trend downwards

Fixed term mortgage interest rates have eased across the board, while floating rates have begun to stabilise, according to the latest mortgage interest rate survey conducted by the Real Estate Institute of New Zealand.

REINZ National President, Graeme Woodley said today that one driver of easing fixed rates is a widespread expectation that the Reserve Bank will reduce the Official Cash rate (OCR) on July 24.

He said, “Lending institutions are, to an extent, by lowering fixed rates pre-empting an OCR reduction – seeking first mover advantage and keeping within competitive range of each other.

In addition to this, some banks are recommending that homeowners fix rates now, rather than waiting to see if rates will drop further. This sentiment is reinforced by floating interest rates remaining relatively unchanged, while fixed term rates ease. Banks and lending institutions are seeking to encourage lenders into longer term mortgage arrangements.”

In the month to July 10, twelve of the sixteen institutions surveyed dropped their fixed rates between 0.04 and 0.35 per cent, with most fixed rates dropping by 0.10 to 0.15 per cent.

The degree of easing in fixed rates has declined compared to the previous month, when fixed rates eased between 0.10 and 0.41 per cent, the majority fixed rates dropping by 0.25 to 0.35 per cent.

“While longer terms rates are certainly very attractive at present, there are indications that the bottom of the fixed rate market hasn’t been reached. Those seeking to maximise savings on their mortgage might want to wait and see, but as nothing in life is ever guaranteed, those with a nervous disposition might be better to consider a fixed term arrangement now”, said Mr. Woodley.

As of July 10, Floating rates ranged between 6.65 and 7.35 per cent. One year fixed rates ranged between 5.95 and 6.30 per cent, two year fixed rates ranged between 5.99 to 6.50 per cent, three year fixed rates ranged between 6.30 to 6.70, and four and five year rates ranged between 6.40 to 6.80 per cent.

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