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Latest Reserve Bank figures indicate New Zealand's home owner-occupiers are increasingly focusing on shorter term fixed mortgage rates - presumably in the assumption that rates will come down sooner rather than later

Personal Finance / news
Latest Reserve Bank figures indicate New Zealand's home owner-occupiers are increasingly focusing on shorter term fixed mortgage rates - presumably in the assumption that rates will come down sooner rather than later

The 'short is good' philosophy that's become clearer and clearer in recent months has continued to be apparent in the latest available mortgage figures - these ones for December 2023.

The confirmation of this 'go short' trend is provided by the series that the Reserve Bank (RBNZ) introduced during 2023, the C71 data series, which details mortgages as they are actually drawn down and for what terms they are fixed for.

As I've said before, sadly the information is backdated only as far as April 2021, but one thing that's been apparent is how much the preferences do change month by month, indicative both of a keen desire from the homeowners to get the best perceived interest rate and the impact the 'specials' that the banks are pushing at various times has.

The RBNZ reports that new owner-occupier lending increased to $4.948 billion in December from $4.653 billion in November.

"One-year fixed terms continue to be the most popular term of owner occupier lending, accounting for 27.7% of all new lending, up from 26.4% in November," the RBNZ said.

Next in popularity in December was the two-year terms, but these have been going down recently in share and the share dropped to 20.6% in December from 21.3% in November. A year ago (December 2022) just over a third of the new mortgage money for owner-occupiers was to two-year terms.

The recent rising star has been the previously unfashionable 18-month term. Its share increased from 17.7% in November to 18.7% in December, hitting a new series high (albeit that the series as mentioned above only dates back to April 2021). A year ago, in December 2022, just 8.3% of that month's mortgage money went into 18-month terms.

Another recent development - and this must be clearly influenced by thinking on the part of homeowners that interest rates will drop soon - has been a rise in the numbers taking up fixed terms for just six months.

The share of lending on six-month terms hit 6.5% in December, which is also a new high water mark for the series. A year ago the share of owner-occupier lending for six month terms was at just 2.5%

But where some things go up, others go down and the RBNZ reports that the share of owner occupier lending on two-year, three-year, four-year and five-year fixed terms decreased, "whereas the share of all terms below two-year fixed terms increased or held steady".

That's owner occupiers. What about investors, then?

In terms of what the investors have been up to, the RBNZ said new residential investor mortgage lending held steady at $1.4 billion in December.

"One-year fixed terms continue to be the most popular, making up 33.4% of new lending, up from 32.9% in November.

"The share of new residential investor lending on six-month fixed terms increased, from 6.4% to a new series high of 8.5%, whereas two-year and three-year fixed terms declined from 18.3% to 17.6% and from 6.5% to 4.6% respectively."

So, anyway, whether you are an owner-occupier or an investor, it seems clear the plan at the moment is go for the shorter term and hope for rate relief sooner rather than later.

That of course (the rate relief) is ultimately going to be up to the RBNZ. And our central bank might not be in the mood to oblige with cuts to the Official Cash Rate as soon as people are hoping.

Time will tell.

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Thanks to Tony Alexander. His advise to a "T".


Independent economist 


Mortgage rates prob more likely to be lower than higher in 12 months time, so understandable.. But I suspect not down as much as many expect.


Swap rates rising and our RBNZ no longer mandated to support employment, it can focus purely on restraining the inflation by increasing OCR


Yup. A bit of a breakout above an established hovering pattern. Just a day or two old though so too early to say how much longer the increases will last for or where the next top / range will be. Should know in a week or so. But at this stage of the economic cycle it could go anywhere as new economic data becomes available. (Fed FOMC 19-20 March.)


fix short is smart , helps RBNZ, and is probably smart as rising the OCR will not help now