Mortgages
3 min read
Here is your monthly interest rate report.
This gives you a quick, plain English update on interest rates.
Mortgage interest rates tumbled over the last month.
The 6-month rate fell 0.34%. The 1-year rate fell 0.39%.
That saves another $28 a week on a $500k mortgage (paid off over 30 years).
This is based on the average interest rates that my team at Opes Mortgages are negotiating. Not what the banks are advertising.
This gives you a better sense of the interest rates that people are really paying.
But, the longer-term rates didn’t fall much … or have stopped falling altogether. No change to the 4 and 5-year rates in the last month.
The 2 and 3-year rates both fell less than 0.05%. Nothing really at all.
This tells you that the longer-term rates probably won’t change much in the near future. The cuts are primarily confined to the shorter-term rates.
Remember, when you take out a mortgage, the bank will usually discount their rate. So they might advertise 5.99% for the 1-year rate.
But, then, when you take out a mortgage, they might offer you 5.79%
It’s hard to see these as a borrower. So I like to share the discounts we’re seeing at Opes Mortgages.
The only rates with any significant discounts are the 1-year and 18-month rates. All other interest rates are discounted by less than 0.1% behind the scenes.
The average bank advertises 5.96% as their current 1-year rate.
But behind the scenes, they discount this to an average of 5.76%. A 0.2% discount.
Some banks are going even lower.
If you’re wondering, “How low will the banks go?” Here are the lowest interest rates we’ve seen.
These have dropped a lot over the last month.
Last time I showed you these numbers, the lowest negotiated 1-year rate was 6.09%.
This has fallen to 5.59%.
So, over the last 30 days, the lowest 1-year rate in the market has fallen by 0.5%. Huge!
This makes it cheaper for investors and home buyers to buy a property.
Just keep in mind these are the lowest rates negotiated across all banks. So, these DO NOT all come from the same bank.
For example, only 1 bank is taking the 1-year rate down to 5.59%.
So don’t look at this table and think: “These are the exact interest rates I’ll be offered.”
These rates are a best-case scenario.
A net 34% of mortgage brokers say the banks are more willing to lend than the previous month.
That is still a high reading on Tony Alexander’s survey of mortgage advisers.
Banks are lowering their servicing test rates.
At the start of the year, banks tested your mortgage application to see if you could afford a loan at 9%.
Today, they’re testing your mortgage application closer to 8%.
That means you might be able to borrow more money today compared to the start of the year.
No change to cashbacks since last month. Most banks still offer 0.8% - 1% of your loan’s value.
The good news is that inflation fell to 2.2% last month. It’s back within the Reserve Bank’s target band.
That suggests that the Reserve Bank may be more willing to cut the OCR the next time they meet. That’s 2 weeks away on Wednesday, 27th November.
Some economists expect a big cut of around 0.75%. Some expect a more mild 0.5%.
Either way, that’s a big cut!
Whatever happens, I’ll be back in December to update you on the latest interest rate movements.
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.
