Mortgage Interest Rate Musings…

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Some thoughts on the future direction of Fixed interest mortgage rates for borrowers...

Most banks are now pricing home loans / mortgages at below 5% for 1-2 year fixed terms.

These are the lowest rates in the last 40+ Years in New Zealand!

The main driver for fixed mortgage interest rate pricing in New Zealand comes from overseas, usually Europe and USA where interest rates are cheaper than they are in New Zealand.

For some time a number of economists have been forecasting declines in fixed borrowing costs, and indeed these have come to fruition, however, recent international events have caused me to re-think about how low fixed interest rates will go.

This week the US federal reserve began indicating an increases to USA interest rates this year, indicating that the US Economy may be on the improve. This will impact the wholesale price of borrowing from this country, making it more expensive.

Also Greece is trying to re-negotiate the terms of their financial bailouts from the various parties in Europe. This morning Greece has closed its banks and may default on debt repayment potentially resulting in Greece’s exit from the Euro currency. 

The last time this happened, financial markets froze, and the cost of borrowing increased significantly, as investors demanded a higher “risk premium”. Although this time, Greece’s financial woes are well known to financial markets and therefore won’t come as any surprise, the fact remains that there is potential for higher wholesale borrowing costs. 

Well, I think fixed interest rates have gone about as low as they are going to go this cycle, and it wouldn’t surprise me if we start seeing higher fixed borrowing costs by the end of 2015.

So if you are the sort of person that likes certainty about your mortgage repayments, then you may want to start considering fixing your home loans for a longer term. It would also be a good opportunity to re-assess who you’re home loan provider is, and talk to us about our FREE Mortgage Broker services, to make sure you are getting the best deal for your finances, your family and your future.

Remember, we're based in Tauranga and can come to you (any time that suits you - even after 5pm) wherever you are across Tauranga, the wider Bay of Plenty or the Waikato.