Mortgage Rates - 2017 discussion

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mattwnz

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#1723194 20-Feb-2017 18:51

joker97:

There's not much the banks can do about interest rates, it's got nothing to do with not wanting to see you at a mortgagee sale auction.

Because our banks are so small, they don't have a lot of capital. So they borrow money from overseas and sell it to you (for a handsome profit).

So whatever they buy the lending at, you pay at the other end.

Most of our banks have big parent owners in OZ though. But I do worry if there is a big financial crisis, whether they will be cut free. Especially as we are one of the only countries not to have any deposit guarantee scheme. The banks in Oz do have a guarantee scheme, so it doesn't make sense that we don't in NZ.

mudguard

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#1723195 20-Feb-2017 18:54

KrazyKid:
As for a 10 year loan - But what happens when you want to sell your house to by another - break fees?

They could be large enough to prevent someone from going through with the sale. It's been a few years since I worked for a bank but with rates coming down at the time, break fees were large. The bank basically recovers the margin it loses.

There's probably a formula somewhere.

mattwnz

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#1723197 20-Feb-2017 18:58

mudguard:
KrazyKid:

As for a 10 year loan - But what happens when you want to sell your house to by another - break fees?

They could be large enough to prevent someone from going through with the sale. It's been a few years since I worked for a bank but with rates coming down at the time, break fees were large. The bank basically recovers the margin it loses.

There's probably a formula somewhere.

Don't you normally transfer the loan from the old house to the new house, so there aren't any break fees? Otherwise noone would sell their house if they are having to pay 20k or more in break or early repayment fees.

mudguard

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#1723251 20-Feb-2017 19:55

mattwnz:

Don't you normally transfer the loan from the old house to the new house, so there aren't any break fees? Otherwise noone would sell their house if they are having to pay 20k or more in break or early repayment fees.

I honestly can't remember, but I would think the new security would require new docs anyway. But don't quote me, there may have just been a fee to change the security and leave the loan in place.

The break fees I recall were as much as $60k, but these were people who had fixed at 5 years for 8% or so and on really large amounts. Smaller amounts were often being paid by other banks to entice customers over. That was the whole point of fixed rates, 10 years is a long time to essentially stay in one place, relationships end, people get unwell etc.

Most of the mortgages I dealt with were being split 3 ways, a couple fixed and one floating, very few revolving credit loans. I'm mildly intrigued by interest rates, they've been at historic lows for a little while now, logic would say only one way to go, but who knows, they could drop a little more, and stay that way for 5 years. Nonetheless a very good time to be smashing as much of the debt off.

In a wider sense I don't think rates, or housing is going to change in NZ much unless there is some kind of external stimulus of some kind. Sadly, as my savings aren't keeping up with deposit requirements,

MileHighKiwi

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#1723310 20-Feb-2017 21:16

Jump onto Sorted.org and use the calculators. We have a mortgage of 200K at 4.29%, 2 years remaining. When the rates do eventually rise it might go from 5.00% on average to 8% over a 2-3 year period. We can afford a large interest rate increase but if you owe 500K+ (or much more in AKL), 8% is a big increase in payments.

The HSBC deal sounds fantastic, I'd definitely lock it in. I like having some assurances about my outgoings.

I'm hoping to get my next place in 2-3 years when/if interest rates bite and people who tried making a quick buck now need to sell.

alasta

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#1723322 20-Feb-2017 21:39

According to my (admittedly conservative) budget I can afford to borrow $300k, maybe $350k at a push.

Plug my details into the calculator on the ANZ site and they tell me that I can borrow 'up to $700k'. BNZ's calculator gives a lower figure, but still much more than is realistic.

If the banks really are handing out this sort of money then some people are going to get seriously burnt when rates go up.

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#1723350 20-Feb-2017 22:39

property is a bit silly - at the supermarket, when price is low everybody wants to buy. but property, when price is low, nobody wants to buy, when it goes up suddenly everybody wants to buy.

Disrespective

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#1724345 22-Feb-2017 11:42

alasta:

According to my (admittedly conservative) budget I can afford to borrow $300k, maybe $350k at a push.

Plug my details into the calculator on the ANZ site and they tell me that I can borrow 'up to $700k'. BNZ's calculator gives a lower figure, but still much more than is realistic.

If the banks really are handing out this sort of money then some people are going to get seriously burnt when rates go up.

I found similar when we bought our first house last year. When I actually sat down with the bank and went through the numbers, the amount was much more realistic. I suspect there is a level of ambiguity in the calculators that gets people excited about a particular lender and then once you're starting down the path it's often easier to just stick with them rather than talk to others.

All that being said i'm still very new to mortgages so I have a question.

If I find another bank has more competitive rates is it a simple case of moving my mortgages over to them? I understand that breaking fees on mortgages can be expensive, but do competitor banks offer to pay these fees to ensure my custom? I am used to reviewing all my bills/insurances etc every year and simply moving to another provider if they offer a better service/price. I don't feel like moving mortgages is a particularly easy thing to manage.

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#1724441 22-Feb-2017 13:53

Break fees and Lawyer fees ++.

Sometimes banks will pay all that I'm not sure why they would or wouldn't.

mattwnz

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#1724524 22-Feb-2017 15:52

Disrespective:

alasta:

According to my (admittedly conservative) budget I can afford to borrow $300k, maybe $350k at a push.

Plug my details into the calculator on the ANZ site and they tell me that I can borrow 'up to $700k'. BNZ's calculator gives a lower figure, but still much more than is realistic.

If the banks really are handing out this sort of money then some people are going to get seriously burnt when rates go up.

I found similar when we bought our first house last year. When I actually sat down with the bank and went through the numbers, the amount was much more realistic. I suspect there is a level of ambiguity in the calculators that gets people excited about a particular lender and then once you're starting down the path it's often easier to just stick with them rather than talk to others.

All that being said i'm still very new to mortgages so I have a question.

If I find another bank has more competitive rates is it a simple case of moving my mortgages over to them? I understand that breaking fees on mortgages can be expensive, but do competitor banks offer to pay these fees to ensure my custom? I am used to reviewing all my bills/insurances etc every year and simply moving to another provider if they offer a better service/price. I don't feel like moving mortgages is a particularly easy thing to manage.

I think you tend to look at the rates when your term is due for renewal, so you then shouldn't incur break fees if you switch bank. That is the case with term depsoits, where you wait until they are due for renewal, and then move the money to the bank that has the best rate. However there are no doubt additional fees and admin with mortgages.

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#1724735 22-Feb-2017 21:03

joker97:
property is a bit silly - at the supermarket, when price is low everybody wants to buy. but property, when price is low, nobody wants to buy, when it goes up suddenly everybody wants to buy.

If only land could be manufactured :)

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alasta

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#1726098 25-Feb-2017 12:59

This morning I did some analysis to determine what BNZ's fixed rates over the next seven years imply about their projection of floating rates over that period. The three year fixed rate reflects a rapid rise, and then a decline beyond that but obviously this is just a crude calculation.

If you look at this graph through to 2020, the green bars reflect the debt servicing cost of a $280k loan based on an interest rate increase from 5% to 7.1% and the yellow bars show what I can afford taking into account expected salary increases. I would say if you can absorb an increase of two percentage points over three years then you're probably pretty resilient.

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