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BNZ, SBS hike fixed mortgage rates (Update 1)
October 20th, 2009BNZ has become the latest major bank to raise fixed mortgage rates in the latest round of rate hikes. However, unlike ASB and Westpac, BNZ left its six month rate unchanged at 5.5% (although this is still above Westpac’s 5.39%). (Update 1 includes SBS rate changes.)
BNZ raised its fixed mortgage rates from the 18 month term to five years by between 20 and 40 basis points (bps). Here are the rate changes:
BNZ raised its Classic 18 month rate by 20 bps to 6.59%; standard two year rate by 40 bps to 7.2%; three year by 20 bps to 7.95%; four year by 25 bps to 8.5%; and five year by 15 bps to 8.75%. See and compare all mortgage rates here.
Fixed mortgage rates, spurred by wholesale rates, are rising again as markets predict the Reserve Bank of New Zealand will have to raise the Official Cash Rate earlier than ‘the latter part of 2010′. Statements from the Reserve Bank of Australia have also ignited talk of further quick rate hikes there, with sentiment spilling over to New Zealand markets.
SBS also raised some of its fixed mortgage rates by small amounts on Tuesday:
It raised its one year rate by 10 bps to 6%; three year by 5 bps to 7.8%; and five year by 5 bps to 8.7%.
Tags: ASB, BNZ, Interest Rates, Mortgage rates, OCR, Official Cash Rate, RBNZ, Reserve Bank of New Zealand, Westpac
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October 20th, 2009 at 9:50 am
I wonder where all the property bulls are to say that these rate rises won’t affect the property market and sale prices. This is just the start folks – 5 years rates at 8.75% are going to look cheap soon.
October 20th, 2009 at 9:58 am
They’re out there buying more property, Sam, so that in a few month time they can skite about buying when interest rates were’ only’ 8.75%. Kind of makes sense that one buys an asset before the price of financing it rises – that’s what all this stock market appreciation is all about. The trick is to play the ‘other fool theory’ correctly and escape before the music stops.
October 20th, 2009 at 10:04 am
I agree Sam and Harriet, but keep in mind long term interest rates average 8% in NZ, so 8.75% for 5 years isn’t yet extraordinary. The smarter investors would of all bought in Jan-March and locked in for 5 years at 5.95-6.95%. All I can see happening how is first home buyers and speculators scrambling to beat the interest rate rise and paying stupid prices for property and keeping the market creeping up over spring
October 20th, 2009 at 10:26 am
I remember in the 80’s paying 26% when we had high inflation.
Wait till the inflation kicks in……
October 20th, 2009 at 10:36 am
Property prices in the 80’s were much much lower. Hence, it wasn’t that severe an impact even when interest rates were very high as compared to current situation where property prices are many folds of that in those days.
Well, low interest rates has been quoted as one of the reasons for the increase in demand to buy houses, hence the increase in sales transaction and prices. But, when interest rates rise, then there might be another set of reasons to justify – higher demand and higher prices and the subject would continue.
October 20th, 2009 at 10:36 am
Inflation is a great thing for people overexposed to debt!That is why governments the world over are building up massive debt only to be saved by inflation.Real asset prices drop so holders of wealth will suffer unless they can hedge.Borrow more and prosper!
October 20th, 2009 at 10:38 am
Stuffed : It’s symbiotic ( word of the day ) that we get deflation , not inflation . A decade or two of Japanese-style no growth . Must be true , ‘cos I read it here , in one of the ” 10 at 10’s . ” I’m still gunning for hyperdeinflation . Symbiotic of the times , I guess .
October 20th, 2009 at 11:00 am
Amazing that we have these fairly high rates already with the OCR still at never before seen record LOWS. Rates over 10% are a certainty across the board, variable will prob spike highest and people will have nowhere to run to with all fixed rates sitting high also.
This together with the governments agenda to close the ‘hole’ in property investing tax is going to see a second leg of price falls. Then we will see how silly the 30% real price declines look….
October 20th, 2009 at 11:07 am
But only if the employment market stays weak, Stephen Mac. If it doesn’t and we get catch-up demands a la ’70’s of 30% plus granted, the inflationists will be the winners. There are ‘interesting’ times ahead for the increasingly polarised parts of our society.
October 20th, 2009 at 11:10 am
If interest rates are rising on their own accord, due to cost of wholesale funding, then why would the OCR need to be raised?
Hyperdeinstagfaltion is my bet.
October 20th, 2009 at 11:10 am
Oh well, if it all turns to shite I will run a 240v cord to my gold brick and heat the tungsten up to stay warm.
October 20th, 2009 at 11:19 am
Harriet you are dead right in both your posts. There are always some great posts on these forums. There are interesting times ahead indeed. In other news a mate of mine just asked me if I wanted to go to a property investment seminar with him tonight. I still can’t believe they are still spruiking property this late in the cycle. I can only imagine how cringe-inducing the evening will be as I won’t be showing up.
October 20th, 2009 at 11:21 am
Grandy’s point is very very important. Mortgage rates at 20%+ are easier to cope with, when loans are small. Aint the case today. 15% will destroy tens of thousands of home owners. Given the budget deficits across the western economies…it sure looks like a decade of two of credit being bloody expensive. English might think getting 40 billion was a piece of cake…he will think differently when the rates rise..The other nightmare will be inflation due to the QE madness going on. Commodity prices are already rising. Labour is starting to scream for wage increases. Then along comes Alan and up the ocr goes..where she stops only the market knows.
October 20th, 2009 at 11:22 am
All of these comments sound like wanna be economists. Most people who buy houses want a place to live and raise their families. They don’t care particularly much about interest rate rises and falls because over a 30 year mortgage there will be ups and downs. These same familiy people know that over 10 – 30 years that their property will be worth a lot more than the interest they have paid. It has always been that way and is almost certainly going to continue to be that way. If you are looking to buy a house for a home then I believe you should make the move that is right for “life” not for current or forecasted rates and possible doomsday scenarios. You either “do” and live or “don’t” and look back wishing you had.
There are too many people in my opinion whose analysis on whether to buy a house is based on ridiculously complex global issues and forecasts. At the end of the day no one knows what the future holds.
October 20th, 2009 at 11:40 am
“These same familiy people know that over 10 – 30 years that their property will be worth a lot more than the interest they have paid. It has always been that way and is almost certainly going to continue to be that way.”
Wow. Profound. Much greater than any of these ‘wanabe economist’ comments…
October 20th, 2009 at 11:46 am
And what does one do at the other end, Martin, when the family rearing business and the 5 bedroom etc. home is no longer needed? With, let’s hope, 50 years to go. Move to a more appropriate dwelling, and do what with the balance? No finance co. left worth a bar; stock market a shambles; cash at risk of inflation ( or is it?); business’ discriminated against by the taxation regime or back into the old tried and true propety market, to see whatever changes to legistlation ocurr- not to mention generational change of all description.
So “right for life” changes with life, and discussions like this will become more and more crucial and common, and complexity will become THE game.
October 20th, 2009 at 11:48 am
Wally,
Looks like OCR might go up, but there is another battle up front ie. the rising Kiwi dollar, hence rising OCR is really a tough decision for RBNZ without having to affect the productive export sector that our economy needed most. But, seems most consumers are benefiting from the high Kiwi dollar, so who wants to rock the boat?
http://www.interest.co.nz/ratesblog/index.php/2009/10/20/opinion-kiwi-worlds-strongest-performing-currency-over-75-usc/comment-page-1/#comment-42513
October 20th, 2009 at 12:33 pm
Harriet, you raise some possible scenarios and interesting points but complexity is not in my opinion going to be the game at all. Life (although appearing complex) is actually quite simple. Most people want the same thing and a house is one of them. We all live and work with people who are trying to buy their first home, people who are starting families and upsizing, older people downsizing etc etc. Why do you propose that the stock market will be a shambles in 30 yrs time, or that there will be no finance companies? People seek opportunities, people want stability and the world has always (in my non expert opinion) seemed to find a balance after being out of balance –
Life will become complex if people en mass suddenly don’t want to do things that they have always wanted to do – ie buy products, own a house, do the best for themselves and family.
Stephen – I’m not trying to be profound, just to offer an everyday perspective rather than an intellectual one.
October 20th, 2009 at 12:49 pm
Grandy I think you will find Bollard will just be catching up with the market. He is always behind the curve. If he took up surfing, expect to see him miss every swell. I see we have a preacher on the thread. Are you for real Martin?
October 20th, 2009 at 12:51 pm
Go for it Sam. Take your camera and post us a corker video on how the buggers are still at it.
October 20th, 2009 at 1:06 pm
Maybe we need some Old Testament debt forgiveness.
October 20th, 2009 at 1:16 pm
I think you’ll make Wally’s blood boil with that one, Megan! Unless you’re talking about the Jubilee mine outside Kalgoorlie……
October 20th, 2009 at 1:23 pm
It’s enough to make a Capitalists’ blood FREEZE. Interesting to see what would happen if the music stopped for a few seconds. Not an experiment to be tried on a grand scale, I suspect.
October 20th, 2009 at 1:42 pm
Debt forgiveness…harhahahaa…fat chance there Megan. Show me a bank that would and I’ll show you a flying pig dressed as Santa…the point is those who signed up to massive debts did so expecting in many cases to flog off their properties for fat taxfree capital gains and then have another go and another. It is disgusting that taxpayers are being fleeced by stupid thieving politicians so fatcat bankers can escape the debtors noose. Trouble is the pollies all expect fatcat jobs when they get the boot from politics and so they throw other peoples money at the bloated corporates. A few knighthoods help as well. The Old Testament Gold Mine…great name.
October 20th, 2009 at 1:52 pm
Grandy,
“Well, low interest rates has been quoted as one of the reasons for the increase in demand to buy houses, hence the increase in sales transaction and prices. But, when interest rates rise, then there might be another set of reasons to justify – higher demand and higher prices and the subject would continue.
”
yes its a bit like a booming economy being a reason for the boom, and then the bust became a reason because of cashed up expats returning home.
The reason for the turn around over the past year is exclusively low interest rates. its made buying a house 60% cheaper IN THE SHORT TERM. Expect falls again once rates rise……… and who knows what shocks lie ahead. The difference is that the govt is running out of money to stimulate the economy.
October 20th, 2009 at 2:08 pm
I was reading that there has been a noticable increase in people are making an effort to pay off their mortgages whilst interest rates are low. I know a few people (including us) who brought at the end of last year when house prices had tanked who are doing this.
October 20th, 2009 at 3:23 pm
Shortie, that is so counter-intuitive if you stop to think about it. Why would you make an effort to pay debt off faster when it becomes cheaper to service.
I suspect the reason people are paying their debt off faster is that they are able to, and they are uncertain about their income – i.e. they have kept payments the same so that the % of principal they pay off is higher.
As interest rates go up the principal payments will reduce (and for many stop all together).
October 20th, 2009 at 3:40 pm
I’ll bet Shorty is paying off the student loan of fast as he can whilst it’s still at 0%, Mike in Welly !
October 20th, 2009 at 7:32 pm
“I suspect the reason people are paying their debt off faster is that they are able to, and they are uncertain about their income – i.e. they have kept payments the same so that the % of principal they pay off is higher.”
But think about it, why would people be able to pay their debt off any faster? Incomes and productivity haven’t increased nor have prices of other necessities decreased. Just because people feel its prudent to pay off their debts quicker because debt servicing is cheaper doesn’t actually mean they have the ability to do so.
October 20th, 2009 at 8:33 pm
Higher interest rates are only a problem for those that need to borrow money.
35% of home owners have no mortgage and another 30% have mortgages that are less than 50% of the value of their property. As someone above says long term 5 year average rate is around 8% so locking in now at 8.5% is not that painful and gives long term repayment security.
So don’t panic sheeples – it’s not as bad as it seems – rates are only headed back to the levels people were happy to pay a couple of years ago and wages have increased since then.
October 20th, 2009 at 9:03 pm
Martin you are spot on!!!
You’ve said pretty much all I wanted to say but did’t know how to put thoughts into words rightly.
Live goes on, many on here are blinded by theories,numbers and statistics…..
We are all humans and as long as greed, need and want are here to stay, things are never going to change and will go around and around.
People need to eat and a place to live, enough said.
But i m sure someone on here will be keen to prove he/she can go on without food and no place to stay like always?
Oh thats right the interest rate rocket is going to shoot up, those stupid mortgage holders are going to be hit. How high would you let the rocket fly? Lets kill the exporters and bring the entire country down.
October 20th, 2009 at 10:27 pm
“Higher interest rates are only a problem for those that need to borrow money.”
“35% of home owners have no mortgage and another 30% have mortgages that are less than 50% of the value of their property. As someone above says long term 5 year average rate is around 8% so locking in now at 8.5% is not that painful and gives long term repayment security.”
Yeah, but it is clearly obvious that the NZ economy relies on a steady stream of suckers to take on truckloads of debt to drive the “wealth effect.” So the sheeples have every reason to be concerned that rates are heading back up; that debt continues to accumulate; and real incomes continue to decline.
October 20th, 2009 at 10:59 pm
At least it means Bollard doesn’t need to worry so much about hiking rates, because the banks are doing if for him.
October 20th, 2009 at 11:04 pm
@ J.C.
Can you share where did you obtain that data ” 35% of home owners have no mortgage and another 30% have mortgages that are less than 50% of the value of their property”? Thanks.
October 20th, 2009 at 11:21 pm
Nice post. Very informative discussion. I collected lot of information regarding interests in mortgage banking. Thanks for sharing with us.
October 20th, 2009 at 11:33 pm
Grandy – it’s a thing government does called a census!
October 21st, 2009 at 12:03 am
You mean Senseless
October 21st, 2009 at 12:22 am
“Grandy – it’s a thing government does called a census!”
That’s great manager but please use numbers for insight, not to trot out silly generalizations about how people are generally better off under a low-interest rate environment triggered by the largest credit crisis in history.