Homeowners are increasingly reaping the benefits of the Reserve Bank's recent interest rate cuts as banks race to offer competitive mortgage lending rates. With many homeowners set to come off fixed interest rates in the coming months, now is the ideal time to contact a mortgage broker and prepare for the transition.
ANZ has announced its largest home loan rate cuts this year, with significant reductions taking effect tomorrow (20th August 2024). The bank’s special one-year rate will drop by 40 basis points (bps) to 6.45% per year, while its 18-month special rate will fall by 50bps to 5.99%. This marks the first time since October 2022 that ANZ's 18-month special rate has dipped below 6%.
Grant Knuckey, ANZ New Zealand’s Managing Director for Personal Banking, highlighted that the Reserve Bank's move and the resulting fall in wholesale interest rates have enabled the bank to pass on these savings to customers. "We’re hopeful the changes will provide some relief for homeowners, as well as first-time buyers looking to enter the market," Knuckey said.
The current competitive environment presents an opportunity for borrowers, especially those who fixed their home loans on shorter terms in recent years. These borrowers will soon be in a position to take advantage of the newly lowered rates.
In response to the Reserve Bank’s decision last week to cut the official cash rate (OCR) by 25bps from 5.50% to 5.25%, banks have swiftly moved to reduce their mortgage lending rates.
ANZ lowered its floating and flexible home loan rates by 10bps to 8.39% and 8.50%, respectively. Meanwhile, ASB cut its fixed home-lending rates by 10 to 34bps, with the one- and two-year rates now at 6.59% and 5.99%, respectively. Kiwibank also lowered its home loan and business variable lending rates by 25bps.
The Reserve Bank's announcement signaled that annual consumer price inflation is returning to within the Monetary Policy Committee’s target band of 1% to 3%. The forecast suggests that the OCR could fall further to at least 5% by the end of the year and possibly to 4.5% by June next year.
Additionally, The Co-operative Bank has introduced a leading one-year home loan rate, effective tomorrow. The rate for owner-occupied homes with at least 20% equity will drop by 40bps to 6.39%, while its standard rate for the same term will fall by 40bps to 6.89%. For those considering an 18-month term, rates will be reduced to 6.15% (owner-occupied) and 6.65% (standard).
Given the rapidly changing interest rate landscape, it is crucial for homeowners to consult with a mortgage broker now. Doing so will ensure they are well-positioned to secure the best possible rates and terms when their current fixed-rate periods end. Taking proactive steps now can help homeowners make informed decisions and potentially save significantly on their mortgage costs.
Top tips when you are close to Home Loan refinancing:
• Use an expert. Mortgage brokers are generally free of charge and know all the options available
• Shop around for the best rates, not all banks are offering the same rates and the same rates may come with different perks or benefits
• Find out what refinancing will cost – is there a break fee on your current mortgage or home loan?
• Calculate whether it is worth it. What is the tipping point? $200 a year or $2,000 a year. There’s money to be saved but balance that with time… or get someone to investigate for you
• Ask a mortgage broker to present you with 2 or 3 options.
• If you're able to keep your repayments the same or even higher, refinancing at a lower rate will enable you to pay off your home faster with less interest overall.
