Mortgages
3 min read
Here is your monthly interest rate report.
This gives you a quick, plain English update on interest rates.
A lot has happened since last month. Let’s dive in.
The Reserve Bank cut the OCR for the first time in 4 years.
That kicked off a round of interest rate cuts from the banks.
There were so many cuts my team launched the Opes OneRoof interest rate cut counter.
This updates every day. It shows that since the start of the year, banks have cut their rates 214 times.
Westpac has cut their 18-month rate 8 times since January!
It's difficult to track interest rate changes.
Banks advertise rates online. Those are easy to see.
But when you lock in a rate, they'll typically offer you a discount.
And it’s these negotiated (discounted) rates we really care about.
So, for months, I’ve tracked the rates my mortgage advisers at Opes Mortgages have negotiated.
The 18-month negotiated rate has fallen the most.
A month ago, you’d get around 6.5% for the18 month rate. That’s fallen to under 5.9%. A huge 0.6% drop in just a month.
A few months ago, the banks offered big discounts on the 1-year rate.
That’s now moved to the 18-month rate.
If you go to their website, the average bank advertises 6.2% for the 18-month rate.
But behind the scenes, they discount this to an average of 5.88%. Some banks are going even lower.
Here are the discounts my team at Opes Mortgages is negotiating off the bank’s interest rates.
Mortgage advisers continue to say that getting a mortgage approved is becoming easier.
A net 40% now say that the banks are more willing to lend than the previous month.
Part of this is that the servicing test rates are falling.
Just a week or two ago, ANZ dropped their servicing test rate to 8.5%.
That’s down from around 9% at the start of the year.
Remember, the servicing test rate is the interest rate a bank uses to see if you can afford a loan.
The lower the test interest rate, the more you can borrow (all else being equal).
No change to cashbacks since last month. Most banks will give you a cashback of 0.8% - 1% of your loan value.
So if you take out a $500k loan, they might give you $4,000 - $5,000 in cash.
I went through the risks and ‘gotchas’ of cashbacks last month. You can check them all out here.
Many investors chose the 6-month or 1-year rate at the start of the year.
These shorter-term rates were more expensive.
But the logic was that interest rates would fall and you’d be better off once rates came down.
That strategy seems to have worked.
Today, I see a different opportunity.
The 18-month rate is looking attractive. It’s fallen over 0.6% in the last month and is the most heavily discounted.
If you choose between the higher 1-year rate and the lower 18-month rate … think of it this way.
For the 1-year rate to make sense, the 6-month rate would need to fall to <5% by September 2025.
That’s a 1.8% drop in the next year.
I don’t think that’s likely.
So, a number of my investors are choosing the 18-month rate today.
But … if interest rates change tomorrow, the strategy might change.
Not much to look out for this month. No OCR update until mid-October.
I don’t expect interest rates to change much over the next few weeks.
But once we get closer to the OCR announcement, the banks might start cutting again.
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
Mortgage broker for over 10 years, property investor and Managing Director at Opes Mortgages
Peter Norris, a certified mortgage adviser with 10+ years of experience, serves as the Managing Director at Opes Mortgages. Having facilitated over $1.2 billion in lending for 2000+ clients, Peter is a respected authority in property financing. He's a frequent writer for Informed Investor Magazine and Property Investor Magazine, while also being recognized as BNZ Mortgage Adviser of the Year in 2018 and listed among NZ Adviser's top advisers in 2022, showcasing his expertise.
