BNZ is the latest bank to cut its 18-month fixed home loan rate to 4.45% — but should you take it?
The bank said earlier today it was cutting a number of its rates.
Among them, the six-month rate would fall by 10 basis points to 4.79%, the 18-month by 4 basis points to 4.45%, the two-year by 16 to 4.49% and the five-year by 0.4% to 4.99%.
ASB cut its 18-month rate to 4.45% on Monday, which it said at the time was market-leading.
This makes the 18-month rate slightly cheaper than the one-year rate at both banks.
Gareth Kiernan, chief forecaster at Infometrics, said it could be an option that was worth considering.
“You might be able to refix in April 2027, in 18 months’ time for about 5.1% for two years, which is not a terrible rate.”
He said his modelling suggested the best option at the moment was to take the slightly higher one-year rate and then fix for two years late next year before rates started to rise again.
He said there would start to be an upwards drift in rates by about October.
“Over three years, that gives you an estimated average rate of 4.59% whereas the average rate for two 18-month fixes might be around 4.75%.. Not huge regret, but enough…”
Rates have dropped from more than 7% at the peak.
Fifty point cut after ‘considerably larger than expected” second quarter GDP reading. (Source: 1News)
Someone with a $1 million mortgage would have seen their payments drop from about $1500 a week on a 7.3% rate to $1162 on a 4.45% rate, if they had a 30-year term.
Commentators generally say that the best option is to find a rate that works within your budget and suits your circumstances.
At 4.99% for five years, fixing for that time now is only slightly more expensive than a one-year, then two two-year fixes, according to Kiernan’s calculation. “So the certainty offered by 4.99% doesn’t cost a lot more.”
Kiernan said his worst call was fixing for three years in early 2015 at about 6.2%.
“Even professional forecasters can’t always get it right. I’ve learned to take the swings and roundabouts.”
Brokers say banks generally are competing with cash rather than trying to offer lower rates to tempt borrowers across from other lenders.
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