OCR on hold while aggressive mortgage rates cut by 0.16%

How mortgage rates are calculated

This content is about interest rate update. We all heard that big news, which is Reserve Bank keeping the OCR unchanged at 1%. It really comes as a surprise to a lot of people and even to bank economists. Because they all predicted there would be a cut at this time, but it didn’t happen. And the Reserve Bank Thinks the current economy; we’re still going to monitor, it’s not need another cut.

Now, once the announcement was made, we had a flood of phone calls coming in from clients and prospects and wondering what the interest rate. It is going to be. Well, we told them, “If you want, wait for a few more days “cause that’s usually how long it takes “for the bank to react to Reserve Bank news.” Now, the big news was, on Monday last week, most of the banks start dropping their 1-year rates.

At the moment, almost all the banks, Australian bank, and the Kiwi bank has kept their 1-year rates at 3.39%. Now, a week ago, that was 3.55%. So that was a huge drop. That really surprised us because we thought maybe the bank would drop a bit given this time of the year. The bank wants to do some campaign to gain some market share, but we never expected such a big drop. So that was good news.

Difference between Chinese banks and Australian bank

The 2 years rates was cheaper than the 1-year rates and a lot of people struggled. Should I fake for two because it looks cheaper? But maybe one because I predict some cuts in the near future? But now, the decision is easier because 1-year rate is the cheapest. Now, the Chinese banks. There are three Chinese banks in New Zealand. They still haven’t made any changes to their rates. So, their rates was at 3.15%. Now, it’s the same. So the difference between Chinese banks and Australian banks The difference is actually smaller. Say a week ago, Australian banks 1-year rates was around 3.55% and Chinese banks offer 3.15% So you can tell, that’s a 0.4% difference. But now, is actually very small. Now especially if you take into account Australian banks cash back offer because Chinese banks don’t offer cashback.

So probably work out the same. I don’t know how the Chinese banks will review their interest rate strategy to keep the momentum. Who knows? We’ll keep you up to date. That’s the current rates for 1 year. The 2-year rates is kept at 3.45% for most of the banks. A couple banks actually increased slightly to 3.55% Now, 6 months, ’cause some people ask for 6 months ’cause they might think 6 months is better because then they can re-fix a lower rate Sooner but the six months rate is around 3.99%. So, it’s actually quite a big difference from the 1 year rates. A lot of people still go with the 1 year rates. Now, if you are thinking of repaying your home loan Within the next 12 months, probably consider 6 months. For example, if you are selling your home, fix it at a 1-year fixed term, and then you have to repay earlier; you have to pay break fee probably.

 Cash flow And Interest Rate

You’re not saving anyway. Who should consider more than 1-year rates? Well, there are a few scenarios. It’s more about the stability of your cash flow. If you worry about your repayment obligation then it’s best to allocate some of your loan to a longer term. The scenario including if you’re expecting a newborn and your partner will stay home, stop working for a few months or up to 12 months and therefore, your income will be less but outgoing will be more. That will be a common scenario or you’re looking about changing jobs especially from employed to self-employed.

Your sales will typically not be as so much as earlier than within the first few months. So, certainty is extra foremost. Or probably you’re an investor, you have got huge loans and as buyers, we’re running marathons. We wish to ensure over the following couple of years, that you may repay your loan on time, no problems. Even when the interest rate rises, that you may still duvet any shortfall so, ensure that you’ve got that form of certainty over your cash float. When you have a large mortgage, cut up them across distinct banks and let them come off at one of a kind times of the year.

So that it will support you be stress-free. In case your present curiosity charges is fairly high and you’re considering, “I nonetheless have over a year to return off that fixed term. “will have to I smash or no longer? ” good, to be sincere, we’ve got a few scenarios and normally the spoil rate will work out in a similar way to for those who finished the fixed time period. The difference is less than a hundred bucks so not much difference. But if you have been with your current bank for over three years, maybe we can consider a refinancing scenario. The cash back would cover that break fee or more than the break fee.

Making the decision to refinance is you can’t just reconsider the rates aspect because you may potentially lose some of the features from the current lender or relationship or whatever it is. So you need to take into account the big picture. The best way would be to engage a professional mortgage broker and let them help you navigate all the options. Also if you are property investors, your interest rates especially if you bank with Bnz,you will notice your rate won’t be as good as owner-occupier. So they probably have about 0.25% to 0.3% Higher than the owner-occupier rates so just bear that in mind and it’s really hard to negotiate any discount. That’s just how BNZ prices their investment loan. Yeah, so, just bear that in mind.

Economists Expectation

It’s not that they don’t like you; it’s just the way they work at the moment. Now, economists expect there will be a cut in Feb. But also the bank is Still working with Reserve Bank to see if the capital will increase. If it goes ahead, then that means the bank has to hold more capital and put that money aside in case there is an economy downturn. Which means that costs are going to go up, so what does mean to us? It could potentially Pass any cut To the borrowers, or they may even increase the interest rate so, just be aware that’s possible. That’s the other side of the equation.