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Official Cash Rate Sends Floating Rates Up


Official Cash Rate Sends Floating Rates Up

Mortgage interest rates have experienced considerable volatility in response to the tightening of the Official Cash Rate, according to the latest mortgage interest rate survey conducted by the Real Estate Institute of New Zealand. As a result of the recent Reserve Bank announcement, floating mortgage interest rates rose sharply, while fixed interest rates showed signs of easing against the prior period.

Floating rates over the month-long period firmed almost without exception with 15 banking institutions increasing rates by between 0.15 to 0.45 per cent. NZ Guardian Trust, NZ Home Loans, Public Trust National Mortgage Unit and Tower Trust held their rates stable. The current floating rates available range between 6.95 and 7.50 per cent.

In the month to 12 February, nine of the 18 institutions offering fixed term rates decreased rates by between 0.05 and 0.70 per cent. Of the remainder, AXA was the sole participant to increase its six month fixed rate mortgage rates offering to 6.90 per cent, while nine institutions left their rates for the same period unchanged to last month’s results.

Nine participants also decreased their fixed rates ranging from two to five years by between 0.05 and 0.70 per cent, while one year fixed mortgage rates remained relatively consistent with the prior period with six of the 18 applicable institutions choosing to increase their terms by between 0.10 and 0.20 per cent.

ANZ, ASB, Kiwibank and National Bank were the only mortgage providers to decrease all fixed rates offered between two to five years. Pioneer Mortgage Services also announced the withdrawal of its six month fixed mortgage interest rate, which was recorded at 6.75 per cent the previous month.

The National President of the Real Estate Institute, Mr Graeme Woodley, said “rates are on the rise and predictions of an eight per cent floating rate later this year may be fulfilled sooner than we expected. The easing in fixed two and three year rates suggests the banks are targeting borrowers in those categories.”


Mr Woodley said the decline in fixed rates suggested they had anticipated the OCR increase and were now being fine-tuned in relation to floating rates.

As of 12 February, one year fixed rates ranged between 6.80 and 7.35 per cent, compared to 6.80 and 7.20 per cent recorded in January 2004, and two year fixed rates ranged between 7.25 to 7.60 per cent, compared to 7.22 to 7.50 per cent exhibited the prior month.

Three year fixed rates ranged between 7.45 to 7.80 per cent, as opposed to the previous period’s range of 7.44 to 7.80 per cent, and four and five year rates ranged between 7.15 to 7.80 per cent, in contrast to January figures of between 7.60 to 7.90 per cent.

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