BNZ is throwing down the gauntlet to other banks in slashing its lowest mortgage rate today to below 7 per cent.
The ‘mortgage rates war’ was a key battleground four years ago when BNZ and ASB went at it hammer and
tongs in the spring of 2004.
That tussle over 2 year fixed rates gave the housing market a second wind that did not run out until the end of 2007 and hamstrung the Reserve Bank’s efforts to slow the economy.
The difference this time is that the battle is around the variable and 6 month rates and could restore some the Reserve Bank’s monetary policy powers and lift the economy as it heads towards a difficult 2009.
BNZ has announced a new 6.99 per cent 6 month mortgage rate that makes it the lowest in the market, beating even Kiwibank’s lowest rate of 7.29 per cent for one year and Westpac’s lowest rate of 7.19 per cent for 18 months. ANZ and National’s lowest rate is 7.3 per cent for one year, while ASB’s lowest rate is 7.35 per cent for 6 months.
BNZ’s new one year rate is 7.29 per cent, down from 8.29 per cent, while its 2 year rate is 7.35 per cent, down from 8.29 per cent.
This latest competitive first strike ahead of an expected 100 basis point cut in the Official Cash Rate next Thursday to 5.5 per cent has increased the competitive intensity that is likely to drag many 2 and 3 year fixed rate borrowers down towards a 6 month or variable rate as interest rates drop quickly. Most economists see the OCR falling as low as 4 per cent next year, meaning the variable and short term mortgage rates are likely to drop to 6-7 per cent.
Some economists, including Goldman Sachs and Deutsche Bank, are now forecasting a 150 bps cut on December 4.
Source: New Zealand Herald Online
What does this mean for us – the consumer?
Well the big thing is a saving in your mortgage which in the current economic times is going to help so many people in New Zealand. On top of falling mortgage rates we have falling petrol prices, falling commodity prices. But it doesnt just stop there. The total global downturn means the price of everything goes down such as our New Zealand Dollar which is hovering around the .50c USD mark. Our houseprices are no exception. With many houses dropping in value of up to 10% and some predict even more, some people are struggling to find the cash they once had to make the moves or fund things in the way they used to before.
This is a testing time for many people but the big thing today is that interest rates are falling. We will be recieveing more tax cuts from the national government and a big thing for many kiwis over the summer fuel is alot cheaper. Many people are sitting tight as interest rates are expected to fall further. Talk to a mortgage broker if your financing at the moment. They can offer great sound avice for the future. It is an interesting and will be a tough road ahead but I am sure if we remain smart we can ride this financial storm out alright.