Interest Rates

[muppet]

Hi Guys

Interesting article on stuff this morning.

Westpac bumps up mortgage rates
17 November 2003
By JAMES WEIR

Westpac is the first of the big banks to lift floating mortgage interest rates, in a move likely to spark a round of small rate rises.


Westpac bumped up its floating rate from 7.1 per cent to 7.25 per cent because of rising wholesale interest rates. On a $150,000 mortgage, the increase meant an extra $6.67 a fortnight.

A Westpac spokesman said the bank was "passing on some of the recent increased cost of funds".

The floating rate was set at 7.1 per cent when the 90-day bank bill rate was just 5.05 per cent, but that has recently moved up to 5.42 per cent.

Westpac also lifted some deposit rates.

The Reserve Bank's official cash rate, a prime influence of floating mortgage rates, is predicted to rise to 5.25 per cent as soon as next month. It may go to 6 per cent next year, taking floating mortgage rates to more than 8 per cent.

Short-term interest rates moved up sharply in the last fortnight, particularly after strong job market figures last week, showing unemployment at a 16-year low of 4.4 per cent.

The low jobless rate and strong retail spending figures increased the chances that the Reserve Bank would lift the official cash rate by 25 basis points to 5.25 per cent on December 4.

However, Reserve Bank governor Alan Bollard will have to balance the impact of a rising New Zealand dollar - now above US63 cents - which will dampen inflation by reducing the cost of imports.

While Westpac moved on floating rates, it held its fixed-term loan rates steady. Last week, both ANZ Bank and KiwiBank moved up to Westpac's fixed rates level.

Since its launch, KiwiBank has been significantly undercutting the big banks, offering lower interest rates on home loans. KiwiBank's floating rate remains the cheapest in the market at 6.55 per cent.

But last week's move puts KiwiBank's fixed-term rates for one to five years, just 5 basis points, or 0.05 per cent, below most of the big banks and higher than some

Regards

[muppet]

Hi Guys

BNZ have posted an interesting interest rate tonite.

3.99% for the first 3mths in a 7.6%, 3yr term.

Regards

[RentMaster]

But what is the interest rate AFTER the first 3 months. Just another marketing tool I think. Like paying $500 towards legal costs etc. It sounds good, and you should get it where you can, but in the overall scheme of things, $500 is small compared to the $100,000's you end up paying in interest.
I believe you should still pick you bank based on the long term expected result, and any short term benefit should be seen as a bonus.

[cube]

And westpac's special 6.99% for 30 months has been reduced to 18 months.

[whitt]

I saw in Oz they went thru alot of banks trying the introduction rate thing to entice buyers. With higher rates after. In the end I think the government is going to legislate that the True mortgage (AAPR) rate be always stated in advertising.

The true rate takes account for monthly fees , low intro rates etc.

[muppet]

Hi Guys

Interesting comment on interest rates on Good Returns yesterday.

http://www.goodreturns.co.nz/article.php?ArticleID=976488945

Regards

[donna]

Geez it's an art picking the best mortgage! I have yet to work out whether to go for fixed rate for 3 yrs @ a lower rate e.g. 6.3% or fixed rate for 5 yrs @ a higher rate 7.4% (these were the rates ASB Bank had in July when I last purchased an IP).

I'm sure there are some great number crunching investors out there that can let me know how to work out the difference in savings etc. I suppose one needs to take into account the likely interest rate at the expiration of the fixed term and somehow factor that into the equation.

Regards,

Donna

[cube]

Give those two choices, I'd go for 6.3 and cross my fingers.

Retail 3/5 year rates are now 7.6 and 7.75 (Westpac), so there's not much to choose.

Also, its worth checking what discounts are available - Westpac give .2% without being asked once you're over $250K, and will alway match the major banks if that isn't enough.

Another tip, picked up from John Burley, is to check what benefits shareholders get. For the Westpac, its not much (no re-doc fees when changing one fixed term for another, I think, which would be pretty unlikey anyway :-), but other banks may have different benefits for holding a few shares.

[graemeh]

Geez it's an art picking the best mortgage! I have yet to work out whether to go for fixed rate for 3 yrs @ a lower rate e.g. 6.3% or fixed rate for 5 yrs @ a higher rate 7.4% (these were the rates ASB Bank had in July when I last purchased an IP).

Hi Donna

It depends on what you are trying to achieve. You can't beat the floating rate for maximum flexibility. The only reason to go for a fixed rate is to manage your exposure to interest rate changes. It's no different to taking out insurance. If you do it to save money you may as well take your cash to the casino.

Floating rates are also the only option I know of if you want revolving credit.

If I wanted to limit my exposure to changes in interest rates I would put 1/3 on the 3 year rate, 1/3 on the 5 year rate and maybe 1/3 on a 1 or 2 year rate.

Our loans at the moment are split into 2, 3 and 5 year fixed portions and the remaining 25% is revolving credit. This means any large swings in interest rates will hit us gradually.

The other advice we have been given is that any fixed rate under 7% in the NZ market is a good rate, our fixed and floating rates range from about 6.75 to 6.95 at the moment, so I think we were well advised considering the current rates.

[muppet]

Hi Guys

Lots of minor interest rate movement this week.

Floating rates appear to be moving upwards. Not from the main banks but the financial institutions.

Fixed rates are going in all directions.Some up and some down.

Appears that everyone is just getting into line with the big banks.

Regards

[muppet]

Interest Rate Rise or Drop 2011

Hi Guys

Westpac becomes first bank to hike floating mortgage rate

FRIDAY , 30 JANUARY 2004


Westpac Bank today became the first bank to put up its floating mortgage rate, hiking it to 7.5 per cent from 7.25 per cent to match yesterday's Reserve Bank move.

The Reserve Bank confounded economists and commentators by putting up the Official Cash Rate yesterday despite annual inflation being only 1.6 per cent and the economy forecast to slow this year.

Westpac made its move without any public announcement. A spokeswoman said the bank had decided not to tell the media any longer when it changed its floating mortgage rate.

In November, Westpac led other banks in the previous round of mortgage rate rises.

It lifted its floating rate from 7.10 per cent even though the Reserve Bank had left the Official Cash Rate steady.

Westpac consumer general manager Ken Hodgson said the increase in the rate was in reaction to the Reserve Bank's move but also in response to the "significant" rise of rates in the wholesale market.

He said that while the majority of borrowers were on fixed rates floating rates were still very competitive.

The rate rise would cost a borrower an extra $24 a week on a loan of $150,000.

What I find interesting from the above article is the fact that,

Westpac made its move without any public announcement. A spokeswoman said the bank had decided not to tell the media any longer when it changed its floating mortgage rate.

Shades of the petrol companies who no longer tell us that the price of petrol is going to increase.

It's called good customer relations. No wonder that Westpac aren't in the top three for good customer relations.

I wonder in the light of the increase how many landlords are going to put their rents up or are they going to carry the extra cost? How much extra? $24 per week on $150k.
Regards

[cube]

Given today's article in the Herald re rents, I don't think landlords (in Auckland) will be a a position to pass on the extra cost.

All the wiley ones are on fixed for another couple of years, anyway

Happy rent raising

cube

[muppet]

Too true Cube.

Regards

[Gatekeeper]

Given today's article in the Herald re rents, I don't think landlords (in Auckland) will be a a position to pass on the extra cost.

The same rental situation will more than likely creep down the country.
Auckland is the canary. Imagine if interest rates went up another 1% in the next year, not an unimaginable scenario with the intl economic climate, thats an extra $100 per week on a $150,000 loan. Try passing that on. What I've seen happen in the past cycles is first the glut (happening now), then the ones in it to make a fast buck get scared and scarper because they can't find tenants. Eventually it evens out and the rents can go up. I'm hanging out for that point, I have one place that is renting now for the same amount as I got for it in 1992 (int rates about 13% then). The rent had to go down because of the market early/mid 90's and its only just got back to where it was. The value of the house has more than doubled.
Its time for a rent hike in my opinion. Its just not cutting it.

[orion]

Just because you see something in writing, doesn't mean that it is true.

$150,000 loan if you were on inerest only is approx $7 p.w. difference from 7.25% up to 7.5%p.a.

$150,000 loan on P & I over 20 years is $5 a week difference - from $273.59p.w. goes to $278.86p.w.

Don't believe everything you read. Is it a mistake, or scare tactics??

Regards
Graeme Fowler