Floating rate mortgages have surged again in popularity for home owners taking up new mortgage commitments.
According to the latest monthly Reserve Bank figures, floating rate mortgages were taken up by nearly a third of the owner occupiers taking up new mortgages in January.
The previously unfashionable floating rate mortgages enjoyed a sudden huge surge in popularity in November, but this was somewhat reversed in December.
However, in January, 31.8% of the newly uplifted mortgage money for owner-occupiers was on floating rates, up from 23.5% in December.
That made the floating rate mortgages (just) the most popular individual mortgage option during January.
The next most popular option was six-month fixed rate mortgages, with a 30.0% share, down from 38.1% the previous month.
Nearly 90% of the uplifted mortgage money for owner-occupiers in January was either on floating, or on fixed rates up to a year.
The RBNZ's C71 data series has data going back to 2021. It differs from other monthly series published by the RBNZ in that it shows mortgage figures for after the mortgage has been uplifted (while other series highlight mortgage figures for when the mortgage has been committed to). (The RBNZ summary of the latest data is here.)
The C71 data therefore shows the flow of the money and into what rates as and when it happens.
And the data has therefore been clearly painting the picture how since the start of 2024 mortgage customers have been looking to go shorter and shorter with mortgage terms in order to take advantage of anticipated falls in the Official Cash Rate.
These have been coming. The RBNZ started dropping the OCR in August and since then it has been reduced from 5.5% to the current 3.75%, with further 25 point cuts widely expected at each of the next two reviews in April and May.
A key thing to look out for is when we might start to see clearly discernible signs of home owners looking to 'go longer' with terms.
Two-year fixed mortgage terms have been a regular favourite of owner-occupier mortgage holders, but this term has, like other longer terms fallen right out of favour in recent times.
It will be interesting to see if it makes a come back in coming months - particularly as banks have in recent weeks started pushing market-low rates in their two year terms.
In January 4.9% of the mortgage money uplifted by owner-occupiers was for two-year terms, up from 4.5% in December.
What about the investors?
The RBNZ says floating terms accounted for 35.2% of new lending in January, up from 24.8% in December-24.
In January, well over 90% of investor new lending was on floating or at fixed rates of one year or shorter duration.
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