Have mortgage rates hit the bottom?

Property

Kiwibank CEO Paul Brock says home loan interest rates may be bottoming out

25th Feb 13, 12:31pm by Gareth Vaughan

The boss of Kiwibank, which recently launched its lowest ever advertised home loan interest rate, says interest rates may not go any lower from here.

Asked by interest.co.nz in a briefing on Kiwibank's record half-year profit whether home loan rates could fall further, Brock said probably not but hedged his bets.

"My sense is this is about as low as it goes," said Brock. "But then again who wants to pick that?"

"I guess it just depends on what's happening in the economy overall and my view at the moment is we're sort of in an interesting period. The rates now may continue a bit longer and then we may see a bit of an uptick further down the track as the economy picks up, if it picks up."

"So what people are doing is looking to lock in some of those competitive deals before any pick up in the broader economy pushes rates up."

Kiwibank was currently seeing a "slight" customer preference for fixed-term rates, as opposed to floating rates, from new customers being signed up.

Earlier this month Kiwibank launched a "limited time special" six-month, fixed-term home loan interest rate of 4.79%, which is the lowest advertised, or carded, rate the bank has offered in its 11-year history.

Other banks, including Westpac, have also been running aggressive, low advertised rate specials of late. Westpac offered a 4.89% one-year rate, 5.39% three-year rate, and 5.75% five-year rate, which interest.co.nz believes to be the lowest ever five-year rate advertised by a bank.

Mortgage rates

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Source: interest.co.nz

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17 Comments

by Stephen Hulme | 25th Feb 13, 1:17pm 1361751466

"My sense is this is about as low as it goes," said Brock. "But then again who wants to pick that?"

Everyone with skin in the game and especially the Fed as ZH notes:

When The Fed Has To Print Money Just To Print Money

by xingmowang | 25th Feb 13, 1:20pm 1361751659

Japan has near 0 m-rate. US has near 0 m-rate.

Earth is satuated with newly printed $ and ￥. And you tell me that m-rate is gointg to rise in NZ?

by steven | 25th Feb 13, 1:45pm 1361753103

Seems hard to believe....if it does I cant see it lasting long myself.....to me a 1.5% OCR and <5% floating seems more likely than anything else.

regards

by scarfie | 25th Feb 13, 7:07pm 1361772450

Well if you ever had a play around with (M.V)+i=P.Q you will see why I predict that interest rates must trend down when interest is a factor in the money supply. If interest rates go up for any meaningful period it will bring default, if maintained then collapse.

by steven | 25th Feb 13, 1:41pm 1361752902

Well you could look at the practical minimum in the USA, 3.5%? (or was that a special?) So going down to 5% seems quite possible.

regards

by Swamphen | 25th Feb 13, 4:25pm 1361762720

Westpac putting a 'must close next week' 'never to be repeated' tagline on their latest round of fixed rate cuts only adds to the hype...

by dobrydan | 25th Feb 13, 8:56pm 1361778987

Cheap interest rates could soon be harder to find. Friday, February 22nd 2013, 2:41PM

by Susan Edmunds

Wholesale interest rate swap yields have been rising since the beginning of the year, putting pressure on banks to raise their interest rates.

The most notable wholesale rises have been in the middle of the swap curve, for terms between three and seven years.

I'm interested to know whether this is a double bluff or are rates on the rise....and will it happen in the next OCR announcement? any thoughts?

by Grant A | 25th Feb 13, 9:54pm 1361782453

Dobryden - long-term wholesale rates are up 60 over basis points since their lows in June of last year, and up 30 odd basis points since Christmas. I think mortgage rates havent risen yet because the banks are currently in a mortgage war in a market with flat growth, and are banking on some future downward movment in their funding spreads with less pressure on their spreads offshore currently. I think that barring a financial collapse of some sort, the wholesale lows were in place last year and the short-term outlook for mortgage rates will now be driven by whether those funding spreads can compress further, and indeed upon how much longer the banks will focus upon market share at the expense of margins. Eitherway more upside than downside in the medium term.

by Gareth Vaughan | 26th Feb 13, 11:26am 1361831192

There's more on this stuff in Craig Simpson's story from last week - http://www.interest.co.nz/bonds/63213/rising-wholesale-rates-may-flow-t…

by MortgageBelt | 25th Feb 13, 10:01pm 1361782918

Interest rates will never rise again in our lifetime.

The system is completely broken.

The entire global financial system is broken - we are simply getting by on a daily basis.

Interest Rates will never ever ever rise again. It is a complete waste of time to fix.

It is cheaper currently for you to balance transfer your mortgage onto your credit card at 2.99%, or 1.95% ....

Please borrow the banks money - they need to (almost) give it away .... they're sorry they charged you 11% not so long ago & ruined the economy - they (probably) won't do it again (soon) .

by idlebumski | 26th Feb 13, 12:53pm 1361836402

Fair chance scenario above will be reality, so what I'd be interested in knowing is whether yield will continue to determine asset value, as is case with property in AKL (and what the moneyprinters want), or whether asset values deflate over time, despite rates continuing until reaching effective zero, as has been the case with property in Japan and to lessor extent, USA. Anybody familiar with owning property in Japan?

by dobrydan | 25th Feb 13, 10:19pm 1361783998

Thank you for the posts above. My heart tells me there is no way they could increase interest rates as it would probably destroy what little growth we have in this economy of ours. A good friend (a dairy farmer) thinks along similar lines to MortgageBelt that it would be financial suicide to increase rates!

Then again, we have a conservative Governor who could pull one out of the bag (particularly if he's looking out for the bank's interests rather than my own). And the Govt don't seem too concerned if the NZ$ hits US$0.90 as a result.

On the other-hand my head tells me to fix 80% as the banks probably won't take too much more of a cut on their margins... I believe this is what grant A was referring to above?

Perhaps some haggling between banks is required...

by bigblue | 25th Feb 13, 10:57pm 1361786243

Most likely that wholesale rates will turn down again given downgrade of the UK and the dire situation in Europe. Probably see an OCR of 1.5% in NZ and floating mortgages of around 4% - it's just a matter of when. Fixing any longer than 6 months probably risky as rates will be lower later.

by speckles | 26th Feb 13, 7:51am 1361818282

If you are a quality proposal, 5% fixed around 3 years term, or mid 5s for 5 years are being snapped up, as it is lower than most people have currently floating...people who fixed for this certaintly have two main reasons, their incomes are static or soft and they want certainty.

Ususually you pay for this, currently it is below floating rates up to 3 years.

The other reocurring theme is concern with interest rates rising through a credit event focused on NZ or affecting the commodity currencies. I would not discount this scenario completely either.

by boofta | 26th Feb 13, 9:30am 1361824240

Lets all be realistic here - do we honestly expect any C.E.O to fall on ther sword by openly admitting interest rates will fall. In other words they all have a vested interest, and its all about self preservation. Personally I believe there is enough "fat" in the market, for one of the leading banks to market agressively, and cut interest rates by up to 0.5%, but as we all know this will never happen as it would only be fleeting until all the other banks jumped on board.

For those in the market place, just be astute enough to be aware of what is happening around you, and be prepared to move when you need too.

cha cha

by bigblue | 26th Feb 13, 8:58pm 1361865499

Clearly rates have not bottomed as HSBC have announced a 3 year fixed rate of 4.99%

by speckles | 26th Feb 13, 9:23pm 1361867010

just another leader rate, again 5%, floating are going to stay sticky