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 by dropping it’s one-year rate to 5.59 percent, with ASB and BNZ following suit. Across the other main banks, one-year rates are ranging from 5.69 to 5.79 percent while six-month rates range from a low of 6.29 (BNZ) to a high of 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 on November 27, we expect that rates will continue to fall, offering some welcome relief for homeowners and investors.
For clients whose terms are ending between now and the next OCR announcement, we are now recommending that they consider a floating rate (with a negotiated discount) until after November 27. This is because economists and market commentators are now predicting that, in response to the latest economic data, the Reserve Bank may cut the OCR more sharply than was previously expected with a cut of either 50 or 75 basis points now forecast.
If fixing, it remains a 50/50 decision between six and 12-month terms, but the potential for rapid interest rate reductions suggests serious consideration should be given to going on floating briefly until after the OCR. If your loan comes off fixed after the OCR, we suggest waiting to fix until after this announcement with the aim of securing lower rates.
With rates expected to continue trending downwards – and with the market being extremely competitive – we aren’t ruling out the possibility of one-year rates reaching the early 5% range, or even a 4.99% offer from a bank in December. With many homeowners still locked into rates in the high sixes and early sevens, the sharp declines we’re seeing right now will be a very welcome early Christmas present.
For clients who have recently refixed, we are also recommending that you speak to your adviser regarding whether it might be advantageous to break your current term and re-fix your mortgage. Since the last OCR announcement, we have done this for several clients, resulting in immediately realised savings of thousands of dollars in many instances.
For example, one client had their loan settle at the end of September and refixed on a six-month term at a rate of 6.79%. With rates falling, we negotiated a new sharper interest rate for them and, after paying a $200 break fee, the client is now saving $200 a fortnight in interest!
For another client, the stakes were even higher. They had fixed $6.5 million of lending at the end of September at a rate of 6.19%, but saw that rates were falling. After running the numbers, we advised the client that by paying an upfront break fee of $7,000, they could refix for one-year at 5.59%, saving them approximately $40,000 in interest costs over the next year!
With rates likely to continuing their downward trend, 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.
If your rate term is coming up for renewal, we highly recommend speaking to your adviser about whether it makes sense for you to wait until after the next OCR announcement to refix.
Working with our team is free and our understanding of the market, negotiating skills, relationships with lenders and knowledge of mortgage structures can help you cut years – and potentially tens 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.
