Over the past week, we have seen most of the main banks in New Zealand lower their short-term rates in anticipation of a further drop to the OCR. The anticipated drop was confirmed on October 9, when the Reserve Bank of New Zealand announced it had dropped the OCR by 50-basis points to 4.75 percent.
With the market largely factoring in this cut, ANZ led the way this week by dropping it’s one-year rate to 5.59 percent. This rate is currently 0.5 percent lower than the next closest advertised one-year rate of 6.09 percent (noting that we have negotiated with some lenders to match ANZ’s rate) and a full 1.1percent less than the lowest six-month rate currently in the market.
Outside of ANZ’s market leading one-year rate, we have seen to see a slow decrease in rates across the main banks over the past two-weeks. Currently, six-month rates are hovering between 6.69 to 6.85 percent, while (outside of ANZ’s 5.59 percent special rate) one-year rates are sitting between 6.09 percent and 6.29 percent. For slightly longer terms, rates have remained relatively steady with 18-month rates sitting between 5.79 percent to 5.99 percent, the two-year rates between 5.59 percent and 5.79 percent. Three-to-five-year rates have all remained stable and range between 5.49 and 5.79 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.
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 ANZ’s 12-month rate sitting a full 1.1 percent lower than the six-month rate at 5.59 percent (a rate that is also being matched by some other banks by negotiation), this rate is a market leader and is hard to go past. However, following the 50-basis point drop to the OCR on October 09, we anticipate that six-month rates will likely fall further over the coming weeks and that this gap will close.
With rates continuing to trend downward, we are still recommending that most clients do not fix for longer than 12-months.
As rates decrease, 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.
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.
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.
