Anyone with a home loan that is currently on a floating rate or about to end a fixed term will be interested to know if they should hold off to see if mortgage interest rates will drop this week.
Economists Are Expecting An Interest Rate Cut
The Reserve Bank of New Zealand is widely expected to cut the Official Cash Rate by 25 basis points (0.25%) next Thursday 11th August.
This follows a cut of the same amount in Australia this week in an effort to boost the economy quoting that while commodity prices are above recent lows, this follows very substantial declines over the past couple of years. Australia’s terms of trade remain much lower than they had been in recent years. Taking all these considerations into account, they judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy.
But is New Zealand in the same economic position as Australia?
Do OCR Cuts Mean Mortgage Interest Rates Will Drop?
Again we look to Australia and see that the banks did not pass on all of the 0.25% cut, instead the big banks passed on between 0.10% -0.15% in cuts to home loan rates and used the balance to pump up the banks profit margins.
We tend to follow what happens in Australia as they are our closest neighbours and largest trading partners, and of course sporting rivals too.
Most of the big banks here are also Australian owned, so there is a lot of influence from across the Tasman.
Will the same happen here is New Zealand?
While there are a lot of reasons to think we might follow what happens in Australia there are some key differences here too.
The biggest issue for the New Zealand banks is the “big stick” that The Reserve Bank is wielding with the treat of intruding income ratios for home loan lending which would further restrict what the banks can do. The banks are trying to be seen as doing a good role in an effort to minimise any more lending rules being imposed on them.
The other benefit New Zealand borrowers have is there are some very competitive smaller New Zealand owned banks. These banks are not doing the same levels of home loan lending as the big banks, but many mortgage brokers are now recommending them as a viable option offering interest rates that are just as good (or often better) plus it has the feel good factor with the profits remaining in New Zealand.
Mortgage Brokers Have The Options
Of course if you want to shop around for the best home loan rates then you can and there are even websites that compare all the banks advertised rates to make things easier; however NZ mortgage brokers will often get even lower home loan rates from the banks to offer you.
As you may know I am an Auckland mortgage broker operating as The Mortgage Supply Company in Hobsonville having moved to this company recently after being with Mortgage Link for the past 12-years.
About Stuart Wills – Your Mortgage Broker
My name is Stuart Wills and I have been working in the New Zealand financial services for almost 20-years and while I like to think I know a bit about what should happen and why, we are often surprised by the moves that the policy makers will decide is best for us all – and at times wish I had a crystal ball to seek advice from.
If you have followed my finance blog you will see that most predictions that I make are followed by a question mark. We can never be 100% sure what to expect… but we always try to think through the options and provide our opinion.
As well as being a mortgage broker I am also a home owner with a mortgage after just completing our new home in Hobsonville Point.
For this reason I too am very interested to see what will happen with the New Zealand mortgage interest rates this week.
