ANZ New Zealand's economists think we are approaching the point in the interest rate cycle where borrowers need to think about locking in their mortgages for longer terms.
"For some time now we have been of the view that the low point in the mortgage rate cycle was approaching, and that borrowers would likely benefit from locking in for a longer term," they say in their latest ANZ Property Focus report.
"We remain of that view, and while we expect further modest falls in interest rates, the bringing forward of Official Cash Rate cuts has likely compressed that timeframe, which we now think likely spans months rather than quarters," the report says.
ANZ is NZ's biggest home lender with total exposure of $112.530 billion as of June 30.
Meanwhile ANZ also says borrowers should not feel rushed into fixing their mortgages.
"We think they probably have a little more time on their side, but we are mindful that we are getting closer to the lows, with our mortgage rate projections... suggesting mortgage rates are on track to bottom out late this year or early next year," the economists say.
"For those contemplating a new loan or with a rollover due, such a decision needs to be made now," the report says.
It also suggests splitting the loan over several terms, rather than just choosing the cheapest option.
"While the 18 month [term] is the cheapest rate, and for some will offer sufficient cover, the two year isn't much more expensive, nor is the three year, especially when you consider that we have penciled in that the Reserve Bank will be back in [OCR] hiking mode by early 2027," the report says.
"It makes sense to spread borrowing over several terms in case things don't turn out as expected," ANZ says.
1 Comments
I note Tony Alexander would agree with ANZ as he is currently recommending five years under 4%.
I haven’t had a mortgage for 10 years since I divested my investment properties. However, when I had mortgages i listened to his advice - he was chief economist at BNZ at the time - and although there were break fees, I saved considerable amounts on interest payments.
As they are directly involved in determining longer term rates, bank economists have a far greater understanding of likely future mortgage rate trends than the amateur (naive) keyboard warriors who have previously posted on this site. HouseMouse was one example; he rubbished ANZ with claims that cost him considerably (from memory, something in the vicinity of $500 a fortnight).
While nothing is certain, I would be taking close notice of their view includung understanding and looking critically at their rationale.
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