Market Update. Recent insights
to keep you informed.

Economists at the major banks are forecasting a cut in either August or November, or possibly even both, which would potentially leave us with an OCR of 1%. Even a few years ago this would have seemed unlikely, yet here we are.

This is astounding low – but will it mean even sub-3% interest rates on your mortgage? I’d love to say yes, but the answer is ‘Probably not’. While the low OCR puts downward pressure on home loan rates, banks have other considerations when they set their rates, so only a relatively small amount of the OCR cut gets passed onto consumers. Plus, they’ve got to think ahead and keep their powder dry in case proposed capital requirements are implemented.

One economist is predicting the OCR cut will cause “an upturn the housing market”, which will also be helped by the prospective deposit requirement easing. The logic is sound, but conditions have been extremely borrower-friendly for at least the past year and the market has just been cruising along. I feel confident that there’s no imminent property crash coming and that interest rates will stay low; beyond that we’ll need to wait and see.

And there’s more you can expect to be offered cash, too. It scales depending on how much you borrow, but a $500,000 loan switched to a new bank might attract $3,000 cash and a $1 million loan might get closer to $6,000 or more. (Switch away too soon and you’ll have to pay some of that back.)

This competitive environment for lenders has also generated an innovative approach to changeover fees. One of the big barriers to switching banks is legal fees, which are typically around $800 and can be as high as $1,500. Kiwibank has introduced a free switching service where the bank pays your legal fees to move your loan for properties owned in personal names.

This is proving very appealing to our clients and many have switched banks as a result. It’s a game changer. We are one of just five mortgage advisory in NZ who can deal with Kiwibank. I think we can expect other banks to be weighing up whether they can follow suit – is this the beginning of a trend towards free bank changeovers?

Right now at SuperCity we’ve been doing a lot of reviews for our customers. I analyse your loan amounts, rates, repayments, structure and lender. Could you break your fixed term and save yourself a lot of money? Is another lender going to give you an outstanding deal? Can we restructure or split your lending to help you reduce your debt more quickly? It’s a quick and easy service, with no obligation to make any changes, so if you’d like to know more just drop me a note or give me a call. I’m here to help.