Fixed home loan rates continue to rise

Fixed home loan rates continue to rise

The past week has seen home loan interest rates continue to creep higher. These changes have been pretty much across the board, instead of being confined to one area.

Major changes during the week were from National Bank, which now has all its fixed rates at 7.80% and Sovereign which increased its six month, and one and two years to 7.80%.

ANZ yesterday increased all its fixed rates of one year or more to 7.80%.

Among the second tier banks Kiwibank increased its one year rate 15 basis points to 7.50% and its three, four and five year rates, 10 points each, to 7.70%.

Bank Direct, last week increased its fixed rates, with the exception of its six-month one.

ASB Bank economist Anthony Byett says fixed rates are rising mainly due to New Zealand and Australian influences this time.

Byett says expectations of rate hikes are increasing in both countries and this is feeding through to the fixed rates in both countries.

While there have been no changes to floating rates, they will start going up after March 10 if the Reserve Bank increases its OCR as widely expected.

What’s the best option at the moment?

Economists are a little divided on this issue at present. The ones who are not expecting rate cuts for sometime are suggesting fixing for as long as three years, while others, such as Westpac, which have a more optimistic view suggesting fixing around 18 months to two years gives “the best chance of benefiting from the eventual reduction of the OCR.”

However fixing is not cheap as rates are near the top of their cycle. Since 1999 one-year rates have averaged around 7.05%, two-year rates 7.45% and five-year rates 7.95%.

Currently one-year rates range from 7.20% to 8.45% with the main lenders positioned near the top of this range at 7.80%.

Five-year rates range from 7.60% to 8.35%, and the main lender are offering loans at 7.80%.

For a full list of home loan rates and to compare lenders go to http://www.goodreturns.co.nz/section/200.html

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