Kiwibank, Lambton Quay, Wellington.
Kiwibank will offer a “special” one-year fixed-rate loan starting Tuesday at 2.19%, which it says is its lowest mortgage rate on record.
It will only be available to borrowers whose home equity is 20% or more. Its current rate is 2.35%.
The bank will also cut its one-year interest rate for people with less than 20 percent equity to 3.04 percent from 3.2 percent.
Efforts to stimulate the economy during the Covid-19 pandemic lowered mortgage interest rates, but longer-term mortgage rates were now starting to rise.
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While Kiwibank cut its rates to one year, it raised its fixed rates to three, four and five years.
For borrowers with more than 20% equity, the bank’s three-year rate drops from 2.79% to 2.99%, while its four-year rate drops from 3.09% to 3 , 39%, and its five-year rate drops from 3.39 percent to 3.69 percent.
The “house in the sky” will be the largest and most expensive apartment on the outskirts of Auckland.
For borrowers with less than 20% of equity, the bank raises its three-year rate from 3.64% to 3.84%. Its four-year fixed rate goes from 3.84 percent to 4.24 percent. Its five-year fixed rate goes from 4.24% to 4.54%.
Kiwibank’s rate of 2.19% at one year corresponds to the rate offered by HSBC, SBS and Heartland Bank.
The ASB’s latest mortgage rate report said the bank’s economists believed the country was at, or just after, the low point in mortgage rates.
“The resilience of the local economy in the second half of 2020 and the prospects for further improvement during 2021 are impacting our outlook for interest rates, including mortgages,” he said .
But homeowners didn’t need to prepare for very rapid increases in their mortgage rates.
“ASB now expects the RBNZ to start increasing the official exchange rate (OCR) by 0.25% by May 2022. However, we do not expect the OCR to increase significantly. over time, OCR peaking at 1.25% at the end of 2023. / early 2024, ”they said.
“This suggests that mortgage interest rates are likely to ‘stabilize’ at still historically low levels.”
However, he noted that there was always a possibility that some mortgage rates would drop in the short term.
“Borrowers can now get very low mortgage interest rates, with the one-year fixed rate below 2.3% at the time of writing. [on May 27]. However, they should prepare for a (slightly) higher rate at the end of this term, ”they said.
Borrowers would be prudent to plan to face higher interest rate costs, rather than budgeting on rates that remain this low indefinitely, they said.
Reserve Bank data showed that mortgage debtors had a greater proportion of their loans at one year or at floating rates, than at any time since the aftermath of the global financial crisis in 2011.
In a report released in late May, Kiwibank’s economics team predicted that the country would see most homeowners decide it was time to freeze loans on longer, fixed terms.
“It should be noted the short duration of Kiwi mortgages. Sixty percent of mortgages are either floating or ready to be fixed within the next three to six months. Eighty percent of the mortgage portfolio will be remitted within the next six to 12 months, ”they said.