Finance costs affect home loans

media release

31 March 2008

FOR IMMEDIATE RELEASE

Finance costs affect home loans

CANNEX releases home loan star ratings report today.

As the cost of money on the wholesale market continues to tread a volatile path, borrowers can expect more and more small rate rises over and above the official cash rate determined by the Reserve Bank.

“Home loans and virtually all credit products are being re-priced to factor in the extra costs the banks are shouldering because of the increased cost of money, the most obvious effect of the USA-driven monetary turbulence,” CANNEX financial analyst Lauren Newlands said.

“While this may not directly affect those home owners currently on a fixed rate, it is likely to have an adverse affect down the track when the fixed rate term expires.”

To cushion the impact of relying on the more expensive wholesale money market, banks are trying to build up their retail deposit base to use as a cheaper source of funding.

“Banks are actively courting ordinary mum-and-dad deposits by offering good interest rates to counter the volatility of the wholesale market,” Ms Newlands said.

“This is great for those who are cashed-up but the strategy should also help borrowers in the long term.”

Financial services research firm CANNEX has researched and evaluated over 260 home loans offered by 24 institutions in its latest home loan star ratings, released today. Only the top products which represent value for money in both rates and features have been awarded five stars.

Consumers can compare home loans across five types:

• Standard Home Loans

• Investment Home Loans

• 1,2,3 and 5 year Fixed Home Loans

• 1,2,3 and 5 year Investment Fixed Home Loans

• Revolving Line of Credit

The CANNEX home loan star ratings report can be downloaded on www.cannex.co.nz

ENDS

See... mortgage_nz_mar_08.pdf

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