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SBS, CBS Canterbury hike fixed mortgage rates
The latest round of fixed mortgage rates hikes continued this morning, with SBS Bank and Building Society CBS Canterbury hiking rates. Fixed mortgage rates are rising again with markets picking the Reserve Bank of New Zealand (RBNZ) may be forced to raise the Official Cash Rate (OCR) sooner than 'the latter part of 2010', which it has indicated in its four previous OCR statements. Wholesale interest rates are also on their way up, with longer term year swap rates hitting their highest levels this year. SBS raised its three year mortgage rate by 10 basis points (bps) to 7.9%; and its five year rate by 5 bps to 8.75%. SBS's new three year rate sits below standard rates offered by ANZ (7.99%), ASB, BNZ and National Bank (7.95%). Its new five year rate is at the top of the range offered by banks in New Zealand and is equal to standard rates offered by BNZ and ASB. CBS Canterbury raised all of its fixed mortgage rates, including its six month rate, by between 15 and 26 bps. Its six month rate was raised by 16 bps to 6.25%, while at the other end of the curve its five year rate was raised by 15 bps to 8.85%. See and compare all mortgage rates here.
Bank economists are picking the Reserve Bank will keep the OCR at its record low of 2.5% but drop the 'low till late 2010' phrase in its OCR statement tomorrow morning. Indicators such as consumer and business confidence have jumped in the past month and markets are picking OCR hikes as early as January next year. However, Prime Minister John Key yesterday pre-empted the RBNZ's statement, telling a Dow Jones reporter he expected the Reserve Bank would not raise the OCR until mid 2010 at the earliest if the New Zealand dollar remained strong. Westpac economists yesterday warned borrowers not to wait 'until they see the whites of the Reserve Bank's eyes' before locking in a fixed mortgage, with fixed rates clearly on their way up again.
19 Comments
I am interested to hear
I am interested to hear everyone's advice for people I know who have a $400K mortgage on floating. Should the lock half in for 2-3 years and the other half floating? Or go for the 8.5% 5 year fixed which will be cheap in a years time if predictions of 10% plus interest rates are true.Or should they stay floating?
It's a race to see
It's a race to see which bank is first to break the 10% level. Won't stop there either.
Clear signs the US Tbill auction coming up is set to do really well with massive buying demand....from the FED....with freshly printed loot. Same madness in the UK. And people actually think it is possible for these crooks to get the money back out of the system. How?. The only rort possible involves selling the bonds bit by bit to third parties which will have been given fresh newly printed loot to do the buying. Round and round the dog would run, determined no doubt to bite its bum.
Here's Tony Alexander's latest piece
Here's Tony Alexander's latest piece on fixed and floating rates
http://www.stuff.co.nz/business/industries/3005900/Reserve-Bank-will-act...
Oh I bet he had
Oh I bet he had to bite his tongue Alex, cos the comment ..."and then they will shoot up so bloody fast it will look like a moonshot"...would have been bursting to get out!
28 year old: Sell the
28 year old: Sell the house right now while the Indian summer of property is happening; get a smaller mortgage. $400,000 is too much to borrow for residential property. If it's for rentals do your numbers very carefully and conservatively. My old retired bank manager friend, who is very cunning, says go back to the old formula of borrowing no more than three times your gross income (and then only if you must).
Trouble is ruru, 28yo's friends
Trouble is ruru, 28yo's friends need to find another bunch of chumps who think the way to wealth is borrow big and count on prices rising fast enough to wipe away the debts. That, is the sickness within this country. The banks encourage it and the stupid govt pays lipservice to the need to stop it.
Ramp up the interest rates
Ramp up the interest rates - that'll make "the chumps" think twice before taking on that much debt. If the banks are prepared to lend obscene amounts of money to people (not requiring 20-30% deposit, lending to the point where repayments take up around 60% of someone's pay etc) then perhaps the only way to deter "the chumps" is to make it prohibitively expensive to borrow the money. At the end of it all, it's each to their own and if people are happy to have $400k of debt and be at the mercy of interest rates and property booms and busts, then good luck to them.
With the US and the
With the US and the UK devaluing their currencies, won't there be lots of US/UK investors wanting to put their money offshore? Shouldn't that make the cost of funds in NZ cheaper? What am I missing?
Alex Kiwibank seem to be
Alex
Kiwibank seem to be offering 5.65% on their revolving home loans. That would be a new low for floating rate wouldn't it? (Although this appears to be a special rather than the standard rate)
http://www.kiwibank.co.nz/
28 year old, last week fixing 2 years looked ok, but right now I'd be thinking that if you haven't already fixed your probably best to remain floating to see if there is not some adjustment to medium/long term rates should the markets expectations prove wrong (especially after tomorrows OCR announcement).
If you look historically at interest rate pricing there is pretty much no correlation between what the market prices long term rates at and the reality of where variable rate goes over that period. Late 2008 should be a good enough example of this!
Why there is still a 300bps premium over the swap rate for the longer term rates versus an historic 100bps premium is not quite clear. Does everyone expect crisis conditions for the next five years? Or will the premium shrink as the OCR does increase allowing rates to fall or at least not rise? Why in March in the midst of the crisis was the premium only 200-250bps?
Market pricing is now way out of line, although I fixed back in March, I'd go floating now unless the short term fixed were about the same or cheaper.
A devalued currency keeps funds
A devalued currency keeps funds imprisoned at home, Rob. ie: it becomes prohibitive to buy 'the same thing - eg: a house" overseas. The time for investor funds to flow out of a country is when the home currency is strong. ie overseas investment is cheaper, and before it starts to weaken. My personal opinion is that selling US$ in the short term is fraught with disaster.
Hi Chris_J, yep that's right.
Hi Chris_J, yep that's right.
http://www.interest.co.nz/ratesblog/index.php/2009/10/21/kiwibank-joins-...
We also have a separate page for revolving credit
http://www.interest.co.nz/revolvingcredit.asp
Cheers
Alex
What balance sheet risk exposure
What balance sheet risk exposure do all the banks have to a property collapse. I suspect there is a good deal of balance sheet massaging going on. The govt refuses to allow the bubble to deflate. The RBNZ does what it is told while telling us all it is independent. We are under attack by the govt spin doctors who are desperate to paint a greenshoots picture of an economy that remains as deeply in the hole full of effluent as it was 18 months ago. The first victim in a financial crisis is the truth!
@ruru I agree...already suggested selling
@ruru
I agree...already suggested selling and moving out to the suburbs with a smaller mortgate but Gen Y's don't do sensible things like that
@Chris J
Yeah they are probably ride the floating rate rollercoaster and hope it doesnt spike on them
Anyone knows why we have
Anyone knows why we have higher lending rates then Ausssies, despite their OCR being much higher?
@Wally: Plenty of chumps and
@Wally: Plenty of chumps and chimps in the Christchurch property market at the moment. Friends who have been actively (not passively) trying to sell their house since October 2008 have just sold for near the original target price.
@28 year old: One gets used to the suburbs until (sob) "going to town" is a major and rather unpleasant expedition. But point out to your friends that it's much nicer to be able to choose your suburb...they come in many flavours. And if rates go through the roof the friends won't be able to afford to take advantage of the many wonders of "town". I would hope they don't intend to move house in the next quarter century...
We are stuffed:)
We are stuffed:)
@JS There are a few
@JS There are a few reasons, some of which are listed in this article (quickest one I could find):
http://www.guide2.co.nz/money/news/home-loans/banks-mortgage-rate-cuts-j...
In short, it comes down to supply and demand: 'money' 'costs' more to 'our' banks than it does to the Aussie banks.
In regards to supply, the question is: why funding costs are higher for our banks?, which is best answered by the reserve bank and our friendly ratings agency's.
In regards to demand, the question is: why is there such a high demand to borrow money in NZ and what do 'we' spend it on? The above basically answers that one.
Hope that helps.
"The first victim of a
"The first victim of a financial crisis is the truth"
Wally that is poetry
Re: We are stuffed Good
Re: We are stuffed
Good to see you are staying true to yourself. :)