Can't decide whether to fix that mortgage for one year or for two?
Why not split the difference and go for an 18-month term?
According to the latest monthly figures in the Reserve Bank's recently introduced data set on new lending fully secured by residential mortgages, October saw owner occupiers continuing to take a greater interest in the previously unfashionable 18 month fixed terms.
This is a new data series and so the information goes back only to 2021 - but previously 18 month mortgages have not been a much-considered option.
A year ago, in October 2022, just 4.8% of the new mortgage money taken up by owner occupiers that month was for 18 month terms.
Now the figure is 16.5%. Go back to June this year and it was 12.4%. The ascent has been on during this year.
One-year mortgage terms have tended to be the most popular in the timeframe of this data series, though on occasions the two-year terms have exceeded the one-years.
If we go back a year again the one-year terms attracted 33.2% of new owner-occupier mortgage money, while for one-year it was 26.7%.
As of June the one-year fixed terms had a 27.1% share to 18.3% for the two-year terms. But as of October, the one-year term share had dropped to 25.2%, while the two-year was up to 24.2%, having risen from just 23.4% in September.
At this rate the two-year term may be about to take over again, at least for a while as the most popular option. The last time it was more popular than one-year was in January of this year.
It's been clear since the start of this data series that the Kiwi mortgage customer is very keen on getting the best looking rate - and they are therefore flexible about the length of term depending on how favourable the rate looks.
One clear thing to note has been that in recent times the one-year and two year rates have flipped over, with the one-year rates now more 'expensive' than the two year rates.
The RBNZ's summary of average new 'special' rates each month shows that as of October the average for a one-year fixed rate was 7.26%, versus 7.01% for two-year. The 18-month is setting snugly in the middle somewhere with 7.1% average.
For investors, the clear favourite choice remains the one-year rate.
In its summary of the latest data, the RBNZ said in October one-year terms made up 32.7% of the new investor mortgages, up from 31.6% in September. In October one-year terms were next with an 18.9%, but 18 month terms are starting to get attractive for the investors too - with the share rising to 16% from 13.9%.
The share of total new residential lending on fixed interest rate terms decreased to 82.6%, down from 82.8% in September which was the highest share on record
22 Comments
If I had a mortgage rolling over, then I would be taking notice of the RBNZ (you know, the one who decide on the OCR which affects mortgage rates) and who indicated that a further rise in the OCR was quite possible next year and possible cuts not until 2025, and Westpac (you know, the ones that determine mortgage rates) who commented yesterday that they expect an OCR rise next year and will be soon factoring this into their rates.
I think the prudent answer is pretty straight forward, and I wouldn't be relying on the anonymous keyboard warriors at best relying on guessing, hope or at best their ouija boards.
I wouldn't rely on bank Economists nor the RBNZ Economists, as they often get their predictions wrong. Better to rely on independent Economists such as Rodney Dickens. Also, commenters here such as Jfoe and Chrisofnofame give full explanations to their predictions rather than just guessing.
I think printer8 missed the point of the phase, "Don't fight the Fed". And the Fed has considerably more firepower than the RBNZ.
Ignoring the fact that the the RBNZ can not control the market as printer8 seems to believe they can ...
First rule of getting the best mortgage deal. IGNORE THE CARDED RATES!
Banks are struggling for new business at this time. Thus changing banks will get your current bank to sharpen their pencil (a lot) but other lenders will start with very sharp pencils. The cashback offers alone may be enough to justify a switch! And you should expect a cashback offer from your current bank if others are offering them. Not many people know that.
Whatever you do - don't take the online offer. They are their for the lazy and uninterested only. You'll be poorer (and less wise) for taking it.
Shop around. Use this opportunity to increase your financial wisdom. Don't be a none-too-bright kiwi. We've far too many of them already.
Over the long-term, the floating rate is the most efficient. But in New Zealand the banks put an extraordinary premium on the floating rate, forcing mortgage holders to fixed rates. (Just one part of the banking rort here).
So why bother trying "pick a winner"? It's just easier to mitigate the risk by taking every term available to 5 years?
Who is more likely to beat the market - the banks or Joe Punter? Answer: It sure aint Joe Punter.
That was extremely well timed and you would definitely be an outlier. I wouldn't think many people would have locked in 5 yrs in March 21 given rates went lower still in April 21 and swaps didn't start moving higher until June/July before significant increases in September onwards.
Rent rises as rollovers adapt to rising rates...and likely the govt itself has to adjust living subsidies to suit ...Interesting article in snuff today where rent went up $130 per week which causes me to ponder the data indicating very slight rises being officially posted (all under10% without doing any research). What I do find considerably lame is the penalty this landlord received 5500.00 plus cost $20.44 filing fee...130x52 equates to a higher sum...clearly the tribunal has failed to penalise the landlord...Now I wait for the sharks to espouse how contracts are made to be broken...my penalty would have been 20k (and that is on a good day lol)...be glad im not sitting on the tribunal...lol
https://www.stuff.co.nz/business/133397329/landlord-evicts-single-mum-w…
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