Insights

Interest Rate Insights – October 15

Following the Reserve Bank of New Zealand’s announcement that it had dropped the OCR by 50-basis points to 4.75 percent on October 9, we have seen all the main banks drop their rates.

ANZ led the way last week by dropping it’s one-year rate to 5.59 percent, and this week we have seen ASB and BNZ follow suit by also offering this rate (by negotiation). Across the other main banks, one-year rates are ranging from 5.69 to 5.79 percent while six-month rates range from 6.29 (BNZ) to 6.69 percent (Westpac).  

For slightly longer terms, rates have decreased slightly falling to between 5.69 percent to 5.79 percent for 18-months, with the two-year rates ranging between 5.59 percent and 5.69 percent. Three-to-five-year rates have all remained relatively stable and range between 5.59 and 5.65 percent.

With one more OCR announcement to come in November, we expect that rates will continue to fall, offering some welcome relief for homeowners and investors.

How long should I fix my mortgage for?

With rates expected to continue trending downwards – and with the market being extremely competitive right now – we are recommending that most clients consider fixing for six to twelve months (dependent on the rates on offer at the time of fixing). 

Right now, with several 5.59 percent one-year rates available in the market (which sit 0.7 percent lower than the lowest six-month rate of 6.29 percent), we marginally favour a 12-month term since the rates on offer are market leading and will likely lock in most of the potential interest rate cuts over the near future. Alternatively, a 50:50 split term with the six and 12-month rates would also be worth considering to balance risk.

In the current environment, we are still recommending that most clients do not fix for longer than 12-months.

The opportunity to get ahead

For clients who have recently refixed, we are also advised that you speak to your adviser regarding whether it might be advantageous to break your current term and re-fix your mortgage. Over the past week we have done this for several clients, resulting in immediately realised savings of thousands of dollars in many instances.  

As rates fall, it creates opportunities for mortgage holders to refinance at lower rates, easing monthly payments and providing financial flexibility. For those looking to reduce debt more aggressively, maintaining repayment amounts at current levels while benefiting from a lower interest rate can significantly shorten mortgage terms.

This strategy can lead to substantial savings over the life of the loan, making it an excellent time to reassess mortgages and explore refinancing options. Even a small reduction in interest rates can translate into thousands of dollars saved, a clear win for homeowners looking to get ahead financially.

Take advantage of competition between lenders

It is also worth noting that with competition for customers being fierce right now between lenders, we are seeing banks not only paying cash considerations to new clients but also retention bonuses for those clients who stay loyal. It is important to note however that contributions and bonuses aren’t necessarily offered as a matter of course, so it’s important to speak to your adviser and ask them to negotiate a strong mortgage package on your behalf.

Falling rates and competition by banks for market share provides an ideal backdrop for those considering their next move in the property market, whether you’re looking to buy your first home, re-fix or re-finance, or move up the property ladder.

Looking ahead

The next OCR update will take place on November 27, 2024 but the market is likely to price in further cuts before then. As rates are likely to continue dropping, we are advising that clients hold off on refixing their rates until one-to-two weeks out from when their rates will expire so that they can take advantage of the likely lowest possible rates.  

To understand what the right decision for you is, we recommend setting up a time to speak to one of our qualified mortgage advisers. Working with our team is free and our understanding of the market, negotiating skills and relationships with lenders can help you cut years – and potentially tends of thousands of dollars in interest repayments – off your mortgage.

Ultimately, it is up to you need to make your own decision, as no one can predict exactly what will happen with rates (especially in the longer term), but our advisers can assess your circumstances, provide advice based on the best course of action and then negotiate strongly on your behalf for the best deal.

If you are interested in booking a free consultation with one of our team, click here.

The content of this article should not be taken as financial advice, or a recommendation of any financial product. These insights are based on current economic commentary, market pricing for interest rates, and our personal opinion. Threefold is not liable or responsible for any information, omissions, or errors present.

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