Mortgage interest rates tumbles

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#1163964 28-Oct-2014 21:08

KiwiNZ: Interest rates are a totally manufactured and mostly falsely manipulated means to control. Thats it, there is no real logic.

Only to a point. The rule of thumb is that a central bank is able to control the inflation rate, the exchange rate and interest rates - pick at most two. The other one, almost definitionally, winds up as the swing variable. Plus, while it's true that a central bank can intervene in the market to fix rates, if it tries to fix them at a level grossly incompatible with the settings needed to by an economy then the results won't be pretty - with a recession (eg as from Britain's exchange/interest rate policy in the 1920s), currency collapse (most of Latin America at some point in the last 20 years) and/or hyperinflation (Latin America again) usually resulting.

Muldoon's refusal to let interest rates rise to reflect economic fundamentals, admittedly alongside his poor fiscal management and crazy regulations, is a key reason we got to nearly 20% inflation and had a currency collapse in the 1980s.

eracode

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#1164058 29-Oct-2014 01:08

hangon:
sidders80:
hangon:
joker97: haha i think they'll just say we can give you a 0.1% discount and no other banks are lower. getting from 5.75 to 5 is ... umm ... never heard of it! (esp when everyone else is in the 6s

all major banks have 2 yr carded on 5.75% now

one could generally get 50 to 75 points discount off carded rate with negotiation if prepared to walk off.

0.1% would be an insult.

I work for a bank and I can tell you that sort of discount is NOT going to happen. The current rate for 2 years is 6.39% with 5.75% as a special to lure new customers who have 20% equity so the banks can improve their under 80% book to lend to more customers over 80%. Those days of 5% are well and truly gone. They were there but not now.
if it is a floating rate its a different story.

Please do tell us what sort of discount is going to happen. 25 points? 40 points?

It's not really a special when every bank is running it, is it. And if that sort of discount is not going to happen, I could just switch bank with whatever discount I can get, and the cash incentives is equivalent of another 50 to 100 point discount on a 300k loan in the first year.

Sid is spot on correct.

For all banks, each different fixed rate period has a different margin for the bank. At the special rate the margin will be pretty much all gone and may even be negative as a loss-leader rate to get people in and to maintain competiveness with other banks. Will be very difficult if not impossible to get better than the special rate.

The margins on non-special fixed rates are generally 0.5 to 1.0% pa and banks will often give 0.25 to 0.5 of that away as a discount.

The margin on variable or floating rate is generally 1.75 - 2.00% pa and banks regularly give 0.75% pa or more of that away as a discount.

Sometimes I just sit and think. Other times I just sit.

hangon

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Ultimate Geek

#1164196 29-Oct-2014 10:58

eracode:
Sid is spot on correct.

For all banks, each different fixed rate period has a different margin for the bank. At the special rate the margin will be pretty much all gone and may even be negative as a loss-leader rate to get people in and to maintain competiveness with other banks. Will be very difficult if not impossible to get better than the special rate.

The margins on non-special fixed rates are generally 0.5 to 1.0% pa and banks will often give 0.25 to 0.5 of that away as a discount.

The margin on variable or floating rate is generally 1.75 - 2.00% pa and banks regularly give 0.75% pa or more of that away as a discount.

What's the real margin? Just saying.

https://www.nzx.com/files/attachments/193224.pdf
ANZ 2014 Half Year Result
- good result demonstrates strategy is delivering
diversified growth and stronger returns -
Performance Highlights – 1H 2014 compared to 1H 2013 (PCP)1
• Statutory profit $3.4 billion up 15%; Cash profit2
$3.5 billion up 11%.

existing customers could always switch banks if they feel they are not valued.

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#1164231 29-Oct-2014 11:54

Yeah and be milked by the new one *sigh

rayonline

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#1164256 29-Oct-2014 12:55

Geektastic:
Dairyxox: Google ZIRP and NIRP.
Sure these arn't mortgage rates we can purchase off the street, but part of a modern "interest rate apartheid".

NZ seems to like high interest rates. (In Japan the rate for home loans is 0.49%...!)

Also if you look at NZ banks, the margin between what they borrow at and what they lend at is much greater than many comparable economies: I estimate our rates are at least 1% greater than they should be.

But so is the savings rate at .5 or 0.25%. Maybe that is why they prefer to put money in NZ as an overseas investor.

Geektastic

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#1164286 29-Oct-2014 13:21

rayonline:
Geektastic:
Dairyxox: Google ZIRP and NIRP.
Sure these arn't mortgage rates we can purchase off the street, but part of a modern "interest rate apartheid".

NZ seems to like high interest rates. (In Japan the rate for home loans is 0.49%...!)

Also if you look at NZ banks, the margin between what they borrow at and what they lend at is much greater than many comparable economies: I estimate our rates are at least 1% greater than they should be.

But so is the savings rate at .5 or 0.25%. Maybe that is why they prefer to put money in NZ as an overseas investor.

Of course. Japanese housewives borrowing at 0.5% and getting 5% in NZ etc

But I suspect more of us want to buy houses than save piles of money in bank accounts.

Reibusu

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#1164449 29-Oct-2014 16:08

I've been on 5.14% the past two years after a very deft negotiator at Home Loan Shop got me onto an ANZ mortgage when almost everyone else refused based on my deposit. Only problem is that's now coming to an end, and I'm told the best that can be done for me is as follows:

Term

Rate

Approx. Repayments

1 year

6.15%

$233

2 years

6.39%

$239

3 years

6.49%

$241

4 years

6.79%

$248

5 years

6.99%

$253

That's quite a hit, but I can't see any other option as the only places I've seen lower rates are against repaying at least $200k, which I'm not doing.

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#1164453 29-Oct-2014 16:16

Bnz doesn't support brokers not sure about kiwi bank. So talk to bnz direct.

Jeeves

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#1164800 30-Oct-2014 08:49

Jeeves: Hmm this is all very convenient as we're playing the market for our mortgage at the moment. Just on Friday, kiwibank gave me a letter of offer, part of which included 2 years @ 5.80%.... me thinks it'll be going back to them with a "please try harder" note...

They came back with 2 years @ 5.75 and 3 years @ 5.94 + $2.5k cash. Happy with that.

And kiwi bank do deal with brokers as all of the above was done through my broker.

hangon

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Ultimate Geek

#1165824 31-Oct-2014 12:51

Today, HSBC has lowered its one year Premier home loan rate to 5.39%, a new market-leading low.

500k loan or 100k deposit.

one could get a lower rate from other major banks.

combined with this

ANZ New Zealand has posted a 25% surge in annual profit, attributing it to ongoing benefits from the 2012 merger of the ANZ and National Bank brands and IT systems.

ANZ NZ's net profit for the year to September 30 rose $343 million to $1.711 billion from $1.368 billion in the year to September 2013.

Aside from the ANZ-National merger, Hisco said an improving economy had also helped underpin ANZ's strong financial performance. He said lending grew 5% and customer deposits increased 8%.

jpoc

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#1165851 31-Oct-2014 13:18

Geektastic: ...The point is that you have been able to fix there for the life of the loan for a long long time (many decades) - it's nothing to do with how their economy is now. They also allow mortgage costs and property maintenance as a tax deduction.

This is because they want to encourage home ownership.

There is no reason I can see why NZ could not have 10 year fixed rates - or even 25 year fixed rates. It's just too out of the box for the unimaginative lenders we have.

The US is not the only country to have mortgages available with interest rates fixed for the life of the loan.

The common factor seems to be that such loans cannot be offered by the private sector acting alone. Since the great depression, the US has had government sponsored organisations that have worked in the mortgage market to help make affordable home loans available. Similarly, Germany has had state owned community mortgage banks. That worked very well until we had the rorts that lead to the GFC.

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#1165873 31-Oct-2014 13:31

hangon: Today, HSBC has lowered its one year Premier home loan rate to 5.39%, a new market-leading low.

500k loan or 100k deposit.

one could get a lower rate from other major banks.

combined with this
ANZ New Zealand has posted a 25% surge in annual profit, attributing it to ongoing benefits from the 2012 merger of the ANZ and National Bank brands and IT systems. ANZ NZ's net profit for the year to September 30 rose $343 million to $1.711 billion from $1.368 billion in the year to September 2013.
Aside from the ANZ-National merger, Hisco said an improving economy had also helped underpin ANZ's strong financial performance. He said lending grew 5% and customer deposits increased 8%.

sweet. I love bank wars. Long may it continue (AKL house prices might suffer, and harbingers of doom might have to wait longer since 2003 to see their crash)

again let me reiterate - I don't own property in AKL/Chch

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#1165891 31-Oct-2014 13:33

I spotted this in the London Daily Telegraph today:

David Cameron has said it would be "lovely" for interest rates to remain at historic lows "forever" because it will allow families “to buy the homes they can afford”.

The Prime Minister said that Britain’s low interest rates are “good news” because it has made owning a home more affordable.

He agreed with a voter who told him that a rise in rates could make life “very hard” for homeowners.

Mr Cameron pointed out that he has no power over setting interest rates and joked that he finds the independence of the Bank of England “annoying”.

However, he made clear that going back to a time where politicians could set rates would be “disastrous”.

Interest rates have remained at their emergency level of 0.5 per cent since March 2009.

hangon

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Ultimate Geek

#1168364 4-Nov-2014 11:56

SBS Bank has dropped its two year fixed rate with a 'special' at 5.49%.

And their 6.49% five year fixed rate 'special' also sill applies which is also market-leading.

These 'special' rates come with conditions, the main aspects of which are that a minimum equity of 20% applies.

There are no application fees at SBS Bank.

SBS Bank also offers up to a $3,000 cash bonus for loans of $250,000 or more, but this offer does not apply to 'special' rates. It's an either-or situation with SBS. However, you can select a combination.

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#1168409 4-Nov-2014 12:54

I wonder if it's going to get to 4.99 boxing day special

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