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Mortgage Advice Blog

Get the latest news and tips about mortgage finance and the property market. Scott Miller, mortgage broker from Advanced Mortgage Solutions comments on housing and lending.

~Interest rates

Published by Scott Miller on Monday, July 06, 2009 in

Interest Rate Outlook

Current Interest Rates
Rates offered are the best of standard, carded interest rates available and do not reflect any discounts your Advisor may be able to obtain for your client. Rates correct as at 03/07/09.
Variable 6.30%
6 Month Fixed 5.39%
1 Year Fixed 5.49%
2 Year Fixed 6.20%
3 Year Fixed 6.89%
5 Year Fixed 7.90%

The economy is stabilising, and this should see an end to the easing of interest rates much further, provided we do not see any more turmoil in overseas markets.

We are seeing a continuing strengthening of net migration into NZ with another month of in excess of 2,000 more people into our beautiful country, on an annual basis our population has increased by more than 9,000 which is more than double a year ago, this is predominantly being driven by a sharp decline in the number of Kiwi’s jumping the ‘ditch’ which is now down to record lows not seen since 2006. The strong net migration together with strong housing data supports the theory that the easing of interest rates has almost finished.

Much improved household affordability is being driven by the lower interest rates we now enjoy and the average number of days to sell a house is now down to 41 which is just a touch over the historical average of 39 days and seasonally adjusted sales last month were over 5,700 more than 50% above the trough in November 2008. There is clearly a stock shortage in Real Estate with a lot of people preferring to sit tight in the current climate due to concerns around employment prospects and the continuing conservative approach to lending from banks who all have liquidity concerns and are in a massive arm wrestle for term deposits.

The Reserve Bank has reiterated that it expects to keep the Official Cash Rate low right through to late 2010 and while business confidence has been restored the economy is still hampered by the strengthening of the kiwi dollar due to a continuing depressed global environment, which is undermining the rural and export sectors.

Mortgage rates continue to be influenced by contrasting forces, at one end of the scale you have continued upward pressure on long term rates (3-5 year) due to upward pressure on term deposit rates as banks scramble for term deposits. At the other end of the scale we see the message being reinforced that short term rates will be held low for at least the next 18 months. These forces are seeing a lot of tension in the mortgage market with consumers confused or contrasting in their opinions. Our current strategy still remains unchanged though, be patient and take advantage of the low 6 month or 1 year fixed rates with over 2% difference to 5 year rates, the other option is to consider a hybrid of the two.

What’s Hot
We have been able to extend our very popular 95% LVR product out to refinance clients now. Previously restricted solely for purchasers, we can report many happy clients last month were able to consolidate their debts into one loan, saving them thousands of dollars in interest and reducing their monthly commitments-Help your clients, refer them to us!

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