Let the mortgage wars begin!
The biggest banks in New Zealand have cut their home loan rates to below the 3 per cent mark which is a new record low for major banks in New Zealand.
At a time when the impact of COVID-19 continues to be felt, the move to reduce interest rates will be of little comfort to the hundreds of Kiwi households who have moved to defer payments on their mortgages due to wage suspension or redundancy but it will spell good news for the housing market as a form of potential stimulus pre-empting any property bubble burst in what is likely to be a coming recession.
The record low rates will be great news for first time buyers as these sub 3% mortgage rates and changes to the loan to value lending ratios mean that first home buyers are in a great position to buy if prices go down further.
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COMPARE MORTGAGE RATES BEST FIXED RATE HOME LOANS
First to make the sub 3 per cent mortgage move was the state-owned Kiwibank which announced late on Thursday 7th May 2020 it would be cutting its one year fixed term rate from Monday to 2.99 per cent, down from 3.09 per cent.
When they made the announcement the Kiwibank general manager of product Nicole Pervan said the move to 2.99% was their first ever sub 3 per cent home loan interest rate and was about providing value to customers.
Mr Pervan continued, "Customers with a fixed interest rate expiring within the next month are likely to roll onto a new interest rate 1 per cent lower than their current rate.
"On an average-sized loan this will reduce repayments from $50 to $70 which will go a long way at this time. Customers have the flexibly to pay off their loan faster or keep that money in their back pocket for a rainy day."
The Kiwibank announcement was quickly followed by ASB Bank which has cut its ASB Mortgage rate on the two-year fixed term rate to 2.99 per cent down from 3.49 per cent, effective from today – Friday 8th May 2020.
When asked about the new rate, ASB were quoted as saying, “the reduced rate would help Kiwis manage their home loans during what has been a challenging period, as well as support others into homeownership. This has been a difficult time for a lot of our customers. While we have put in place a number of support options, including mortgage repayment deferrals and interest-only payments, we're continually evolving what we are doing to help Kiwis get through the impact of Covid-19. Offering this two-year special rate is part of that.”
It is widely acknowledged that lower home loan rates would help boost the economy as it gets back up and running, following lockdown. With extra money from the rate drops being generated in Kiwis pockets economists are hopeful that this money will find it’s way into the economy through discretionary spend.
ASB Chief economist Nick Tuffley said, "The Reserve Bank has taken concerted actions to push interest rates down, and these are clearly bearing fruit by enabling mortgage rates to fall to even lower levels. Lower interest rates would put cash into people's pockets helping to stimulate and restart the economy as the lower borrowing rates will also help to further alleviate any financial worries that borrowers may have."
Sadly, these new rate drops will mean little to those who have had to defer payments on their home loans as they remain on their current products. An update on the New Zealand Bankers Association website yesterday showed that 105,035 loans had been reduced or payments deferred with a total worth of $36.9 billion. Those loans include ore than just home loans with other personal lending included such as loans, credit cards and arranged overdrafts.
Looking to refinance? Great deals available now.
If you are already a home owner then there genuinely has never been a better time to look at re-financing. With mortgage rates at a record low there are massive savings to be made that could impact both monthly repayments and the overall interest that you pay on your home loan. We have a team ready to assist. Get in touch for a free consultation over the phone and see if you can benefit.
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