NZers pay off mortgages sooner for floating rates
23 July 2003
New Zealanders pay off mortgages sooner
and take to floating rates
According to a survey released today by leading non-bank lender Wizard Home Loans, New Zealanders are recognising the benefits of paying off their mortgage faster and opting away from fixed to floating rates.
John Grant, Head of Wizard New Zealand, commissioned Colmar Brunton to conduct a national survey, interviewing 200 New Zealand borrowers.
When asked what they did with the financing of their mortgage after the last interest rate cut, over half of the people surveyed said they kept their payments the same, taking advantage of the rate cut to pay more off their mortgage.
Wizard said recent rate reductions of 50 basis points and a possible further cut of up to 50 basis points when the Reserve Bank meets on Thursday, means that borrowers with an average loan of $200,000 (over 25 years) will have reduced their interest bill by a total of over $127 a month. If they retain their pre-cut monthly payments they could save over $43,000 in interest and take four and a half years off the term of their loan.
“It’s encouraging to see that messages from Wizard and other lenders about paying-off your mortgage sooner to save money over time seem to be finally getting through,” said John Grant.
“Those keenest to pay-off their mortgage sooner were aged over 40 years. Those most likely to lower their repayments were the single and those aged 30 to 34. One in four were restricted by a fixed rate loan,” John Grant said.
The Wizard survey also showed some movement away from fixed rates, with 69 per cent saying they would like to put at least some of their mortgage onto floating rates.
“Current statistics tell us that borrowers’ average split is 60 per cent on fixed and 40 per cent on floating rates. I’m pleased to see in our near inflation-free economy, a slight move towards floating rates. While the major banks are encouraging longer-term mortgage arrangements, Wizard bucks the trend by encouraging borrowers towards floating rates,” John Grant said.
The survey also revealed that people in the highest income levels were more likely to put most of their mortgage on fixed rate. Those most likely to put their entire mortgage on a floating rate were the middle income levels, while those more likely to put it all on fixed for two years or more were in the lower income levels.
Wizard has 15 branches in New Zealand and over 160 in Australia. It continues to lift its presence in New Zealand with plans for several new branches in the coming months.