Spring is the traditional time of year when banks begin to rival each other on interest rates. A few weeks ago, New Zealand’s largest lender pushed its one-year rate to an all-time low, with other banks closely following. Since then, we’ve seen cuts in interest rates across the board.
The Reserve Bank has signaled the official cash rate—the rate at which banks borrow cash—won’t rise until 2020 or 2021. It’s been 1.75 per cent since December 2016, making it fairly easy for homeowners to make decisions about interest rates. It’s hard to remember that 10 years ago mortgage rates were as high as 10 per cent.
What should I do if I’m due to re-fix? How long should I fix for?
While the OCR is stable we can’t quite predict the future yet, however, if you do have a mortgage that’s due to be re-fixed there are some great options.
One, two and three-year rates are quite competitive but always shop around by talking to a registered mortgage broker if you need advice. Often the best rates are not advertised, or the cost to change banks can outweigh any perceived savings in interest. Some banks also have more flexibility than others regarding your individual situation and there may be ‘claw back’ implications for any cash incentives a bank may have given you in previous years.
Cameron Bagrie, independent economist, says even though interest rates are low in New Zealand, it’s still tough for the average household as money can disappear quickly. If you are re-fixing and do manage to secure a lower rate, it is a good idea to keep paying the same amount (if you can) so you’re putting more onto the principal and paying off your loan faster. However, seeking advice from an independent expert will help you make the most of the low interest rates.
Find out more about interest rates here.