The average 1-year rate dropped 0.33%. The average negotiated 2-year rate fell 0.26%. 

In comparison, the longer-term 3-year to 5-year rates haven’t changed as much. 

It’s hard to overstate how massive these cuts are. 

Only a year ago, ASB advertised 7.24% as the 1-year rate. Today, that same bank is advertising 5.25%. 

It’s basically a 2% drop in a year. 

That saves $149 a week on a $500k mortgage. That’s if you’re paying it off over 30 years.

This is big money. That’s 7.5x the tax cut we got after the last election.

But I specifically mention that the cuts came from the change in the OCR forecast … not the OCR  cut itself. That won’t be repeated.

So you don’t get too excited the next time the next OCR announcement rolls around. 

I expect some cuts, especially to the 6-month, 1-year and 18-month rates. But not as much as you saw over the last 30 days.

How much can I negotiate off my interest rate?

Remember, the bank usually discounts their rate when you take out a mortgage. 

So they might advertise 5.25% for the 1-year rate. 

But, when you borrow the money, they might offer you 5.15%.

It’s hard to see these discounts as a borrower. So, I like to share what we’re seeing at Opes Mortgages.

Last year’s big discounts are gone. Though, most banks will still offer a 0.05 – 0.2% cut, depending on the rate. 

But, the 2 year rate is the clear exception. No bank currently discounts that rate. 

What’s happening to the floating rates?

I got a great email after last month’s report. Wyatt wanted to know how the floating rates are going. These are also falling. 

Here is ANZ’s floating rate vs the OCR. 

Every time the OCR gets cut, the floating rate gets cut by the same amount. 

There is complete and almost immediate pass-through.

So, expect the floating rate to keep going down as the OCR drops. 

Just keep in mind that the average floating rate across the 6 main banks is around 7.03%. And the average 1-year advertised rate across those same banks is 5.27%.

So, I don’t often recommend that investors float for long periods. The floating rates are over 1.5% higher.

What are the lowest interest rates in the market?

Last month, the lowest 3-year rate was Westpac’s 4.99%. That’s now gone. 

The lowest 3-year rate negotiated rate is now 5.29%. 

That’s an important reminder: interest rate movements aren’t one way. Sometimes, a bank will offer a special for a week. The next week … it’s gone. 

There is good news, though. The lowest 1-year rate I’m seeing has dropped from 5.45% last month to 4.99%.

Keep in mind I’m only getting that from one bank. All the other banks are 5.15 – 5.19%.

That’s still a hefty drop!

Is it getting harder or easier to get a mortgage?

The other big change is the servicing test rates. This is what the bank tests your mortgage on. 

And these changes usually happen behind the scenes.

So, although you may actually pay as little as 4.99% … the bank will make sure that you can afford the mortgage at a higher rate.

A year ago, most banks tested your mortgage application at almost 9%. Today, that’s sitting in the low 7’s.

That's why a net 54% of mortgage brokers say the banks are more willing to lend out money.

What cashback can you get?

No change to cashbacks since last month. Most banks still offer 0.9% - 1% of your loan’s value.

Need help with your mortgage?

Need help with your mortgage? 

Hit reply and let me know your situation. I’ll come right back to you to see if my team can help.

Talk again next month,

Pete