By Gareth Vaughan
The round of fixed-term mortgage interest rate cuts during April and May has seen a swing by borrowers away from floating mortgages and back to fixed-term loans with net new residential mortgage lending rising NZ$610 million in May.
Fresh Reserve Bank data shows the overall value of residential mortgages up NZ$610 million during May to NZ$173.181 billion. The key growth area was one to two year fixed term deals, with growth of NZ$2.6 billion, or 13%, to NZ$23 billion, as two to three year fixed mortgages fell just NZ$4 million to NZ$5.67 billion. At the same time the value of floating mortgages fell NZ$1.95 billion to NZ$106.865 billion.
The move by borrowers back towards fixed-term loans sees the percentage of mortgages floating, by value, drop from the record high of 63% at the end of April to 61.7% at the end of May. It's the first monthly fall in floating mortgages by value since last August.
Data collected by interest.co.nz shows the average advertised one-year bank mortgage rate was 5.63% on April 20 and had dropped 33 basis points to 5.30% by June 1. And over a two-year timeframe the average advertised mortgage rate fell 22 basis points to 5.59% as all the banks cut fixed-term rates. See more here.
The cuts mean that, ranging from 5.60% to 5.75%, advertised bank floating mortgage rates are now above even most of the advertised two-year fixed-term rates, although some customers in competitive situations are able to get rates of 5.0-5.3%. The major banks' advertised one-year rates range from 5.20% to 5.29% and their two-year rates from 5.30% to 5.65%, although some customers are also getting reductions on these in competitive situations or through brokers. Advertised 18 month rates range from 5.40% to 5.70% See all advertised bank mortgage rates here.
Another standout in the May data is the growth of three to four year fixed mortgages. Up NZ$79 million, or 9%, month-on-month to NZ$989 million, the growth in mortgages fixed for three to four years was steady. However, year to date it's spectacular, rising NZ$458 million, or 86%, to NZ$989 million. Over the same period, mortgages fixed for four to five years are down NZ$4 million to NZ$459 million.
Meanwhile, May's NZ$610 million rise in net new lending is the most in a month since NZ$1 billion last October. The Reserve Bank has been compiling fixed versus floating data since 1998.
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(Update adds video, further detail).
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