Move to fixed mortgages continues

Percentage of fixed-term home loans by value on the rise, approaching 50%

Borrowing

Percentage of fixed-term home loans by value on the rise, approaching 50%

2nd Apr 13, 4:02pm by Gareth Vaughan

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The switch by home loan borrowers back to fixed-term mortgages from floating ones continues with the percentage by value fixed rising towards 50%.

The latest figures from the Reserve Bank show, as of February, NZ$95.240 billion, or 52.6%, of the total NZ$181.036 billion worth of residential mortgages floating. Meanwhile, NZ$85.693 billion, or 47.33% (up from 46.7% in January), was fixed. The balance is unallocated.

Of the fixed portion a total of NZ$75.453 billion, or 88%, is fixed for less than two years.

April last year marked the high point for floating mortgages, since the Reserve Bank started tracking fixed versus floating data in 1998. As of last April 63% of all home loans were on floating rates, valued at NZ$109.677 billion.

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11 Comments

by MortgageBelt | 2nd Apr 13, 7:21pm 1364883709

Be interesting to know % on 6months fixed. Not much difference to floating.

Deliberate strategy by banks to freeze the "floating" rate, & offer lower tempting shortterm fixed rates to lockin customers.

Floating will be dropping next year.

by Father Ted | 2nd Apr 13, 7:32pm 1364884373

Locking customers in to very low fixed rate margins doesn't sound like a good stratgey to me, when much better margins on floating are available.

Will take an OCR cut or much lower deposit rates to get a floating rate cut.

by MortgageBelt | 2nd Apr 13, 7:41pm 1364884909

Locking customers in is more important than margins atm. margins have been fattening since 2008 anyway. Ignorant media are yapping about 'low interest rates' so little analysis of the widening margins (apart from interest.co of course) .

by steven | 2nd Apr 13, 8:33pm 1364887992

Do you actually mean "margins"? ie I am assuming that the fixed margin is still 2%? and floating 2.25 or 2.5%? So whether the bank borrows at 5% and lends out at 7.25%, borrows at 9% and lends out at 10.25% or at 4% and lends at 6.25% doesnt seem to matter ie its the same margin?

While I personally think OCR cuts are coming eg. 1.75% (ish) during the Great Depression when they didnt want to cut to low, now 0.25% or similar is the norm. The problem is I bet the bank(s) cant find anyone to lend money to them at 0.25%, or 2%? I cant therefore see how we will get that drop passed on past some point, maybe 4.5% or 5% will be as low as it gets.

Deposit rates could go lower, if banks are awash with OAPs savings and no one wants to borrow then once they have the capital deposits rates could well flounder.

oh to live in interesting times.....

regards

by Father Ted | 3rd Apr 13, 7:13am 1364926409

My point is that a bank earns a better margin with floating mortgages than fixed mortgages. Today that's approximately 0.50% more on floating. So yes, a bank is going to want more people in floating than fixed right now.

I don't agree that banks are trying to 'lock' customers into fixed right now. The reality is that very little market share movement occurs between banks, and it would be very silly to want to lock customers in at such low margins for the next few years.

by steven | 3rd Apr 13, 7:20am 1364926802

The comments Ive seen suggest margins are healthy if not healthier than "normal" So im not sure where you get this from?

Waht the banks want is I guess how they price and try and sell, certainly my impression is for them to try and get you to fix and has been for 4 years at least.

I guesss we agree to disagree.

regards

by retireby50 | 3rd Apr 13, 7:49pm 1364971759

So in conjunction LVR restrictions which should tighten buyer demand then an ocr cut would raise cost of borrowing & raise exports .... More pressure on banks to source funds locally and stop Banks investor / high lvr lending or should I say convert to responsible lending rather than speculative investor or otherwise. With property speculation reduced would overseas buyer demand under no capital gains policy dry up and allow the kiwi 1st home buyer in ... hmmm

by steven | 3rd Apr 13, 7:41am 1364928083

I find it hard to understand why its so high right now...the make believe inflation bogey man I suppose. Sadly I think the RB etc are so wedded to high rates that they will be to slow, again.

Got to wonder how low the OCR can go and still see mortgage rates follow...guess we are going to find out.

1.5%? so 3.5% for "us"....will the wholsale lenders still lend at 1.5%?

regards

by Steptoe | 3rd Apr 13, 8:16am 1364930198

The stradagy is simple..if one remembers the huge charges and contoversy in rescent times, as interest rates dropped and customers trying to get out to lower floating or fixed rates.

About all banks can do is shuffle for customers, so that means conning them into low short term, knowing full well this long low interest rate period will end ands will with a bit of a bang.

The only customers who will can benifit is the short term speculator. ...At the end of the day its about collecting customers in the short term, locking them in..and hopping when rates rise, not all will move to another bank , again.

We have seen these marketing tactics in the past in similar circumstances.

by Wolly | 3rd Apr 13, 3:24pm 1364955862

16 years of free accomodation...harrrrrhahahaaaaaa.....

"Last month the New Plymouth District council issued Eric Brewer with a notice to remove the structure and his belongings from the beach, where he has lived for at least 16 years...... early on Wednesday morning council contractors and police moved, evicting Mr Brewer and tearing down his shelter with a digger.

The council says he was in breach of the Reserves Act and Public Places bylaw and no-one has the right to live on a public reserve without approval".....

Build another one Eric....

by Wolly | 3rd Apr 13, 3:28pm 1364956136

"Holidaymakers will have the freedom to park on the side of the road in Westland again, after a backdown from the local council.

The Westland District Council has announced it will stop enforcing a local bylaw which prevented freedom camping in the region.

The decision comes after a legal challenge from the New Zealand Motor Caravan Association (NZCMA), who in January filed a lawsuit in the High Court over the issue.

The bylaw, which came into effect in November, banned freedom camping within one kilometre of 18 West Coast towns and settlements."

http://www.3news.co.nz/Council-backs-down-over-freedom-campers/tabid/423/articleID/292830/Default.aspx#ixzz2PMaiWRow

three cheers for the NZMCA and a big blurta to the WDC