Interest rates below 5%

Allanah Eriksen at NZ Herald reports:

Lenders are offering home-owners the lowest short-term bank mortgage rates in New Zealand history as they compete to lure customers before an expected rise next year.

Westpac, BNZ and ANZ have all dropped their one-year interest rates below 5 per cent in the past week and ASB is expected to follow suit before the Reserve Bank puts a cap on the skyrocketing housing market, economists say.

David Chaston, of financial news website interest.co.nz, which compares rates, said banks were “unbelievably competitive” at present.

“The banks themselves have special deals for special-interest groups.

“They sometimes end up with 25 basis points off the published rates. So the trick is to go in there and negotiate hard, and they are very receptive to it at the moment.”

Yesterday, Westpac became the market leader for fixed one-year home-loan rates when it launched its “special” 4.94 per cent deal, down from 5.19 per cent.

It is available to borrowers with at least 20 per cent equity in their property and a minimum loan of $100,000. For two weeks in February, it offered a rate of 4.89 per cent, which was the lowest in history.

ANZ launched a one-year 4.95 per cent offer on Monday, matching BNZ’s move on Friday.

The level of interest rates can make a massive difference to a family’s income, if they have a mortgage.

Say you have a $300,000 mortgage over a 15 year term. Here’s your weekly repayments at different interest rates:

• 7% – $621
• 6.5% – $602
• 6% – $583
• 5.5% – $565
• 5% – $546

So interest rates being 2% lower, can mean an extra $75 a week for a family with a $300,000 15 year mortgage.

Having a mortgage myself, I’m appreciating the lower interest rates, but am sadly not seeing an increase in disposable income. I’m being good, and using it to pay off the loan faster.