Existing homeowners feeling the pinch, adviser says
Mortgage borrowers are continuing to bear the brunt of high mortgage rates as rising wholesale funding costs result in further increases to fixed term rates.
Each of the five main banks have increased their fixed mortgage rates over the last couple of months and the latest round of increases, announced by BNZ and ANZ, came into effect on October 25.
Wayne Henry Mortgages managing director Wayne Henry (pictured above right) said that while rising fixed mortgage rates impacted first home buyers, they were a bigger concern for existing mortgage holders who had enjoyed record-low rates for many years.
“They [existing mortgage borrowers] will be feeling the increases the most, as they transition from a 3% or 4% interest rate to a 6% or 7% interest rate – all this while inflation remains high, and the cost of living increases,” Henry said.
BNZ fixed mortgage rates increase by up to 0.16%
BNZ’s one-year fixed mortgage rate for residential owner-occupiers (LVR less than 80%) is now 7.25%, while its standard and Fly Buys one-year fixed rate is 7.85%.
The bank also increased its three-year, four-year and five-year fixed rates on October 25, which now sit at 6.85% and 6.75% (7.45% and 7.35% Standard and Fly Buys).
Its six-month fixed, 18-month fixed, and two-year fixed rates increased over August and September, and are currently 7.39%, 7.09% and 6.99% (7.99%, 7.69% and 7.59% Standard and Fly Buys).
BNZ general manager consumer lending and insurance partners Martin Elliott (pictured above left) confirmed that home loan interest rates were influenced by a range of factors, telling NZ Adviser that the bank strived to offer competitive interest rates to its customers.
“Fixed rates are predominantly influenced by wholesale funding costs, which includes swap rates,” Elliott said. “Swap rates have been increasing in recent weeks, some of which is being passed through.”
ANZ fixed mortgage rates increase by up to 0.26%
ANZ’s one-year fixed mortgage rate (LVR less than 80%) is now 7.39%, while its standard one-year fixed rate is 7.99%.
It’s six-month fixed mortgage rates are 7.35% and 7.95%, its 18-month fixed mortgage rates are 7.15% and 7.75%, and it’s two-year fixed mortgage rates are 7.09% and 7.69%. Its three-year fixed mortgage rates are 6.89% and 7.49%, and its four-year and five-year fixed mortgage rate is 7.34%.
An ANZ spokesperson said that the bank considered “a range of factors” when reviewing interest rates, including the impact on customers, the underlying cost of funds (including wholesale rate movements) and competitor activity.
“We understand the cost of living and rising interest rates are having an impact and we’re closely monitoring how our customers are managing – as people come to refix their home loans, we’re contacting them to make sure they’re aware of the options to manage repayments and offer reassurance and support for those who need it,” the ANZ spokesperson said.
BNZ and ANZ fixed mortgage rate increases follow increases announced by Kiwibank, with chief economist Jarrod Kerr telling NZ Adviser in October that wholesale markets had moved substantially. Kerr said it pointed to persisting high inflation, which was why central banks were communicating the message that they would keep wholesale cash rates “higher for longer”.
In a Linkedin post published on Tuesday, Westpac chief economist Kelly Eckhold said that the bank had increased its inflation forecasts to reflect “ongoing persistent core inflation”, with the bank not expecting it to return to the Reserve Bank’s 2% to 3% target range until “early 2025”.
Adviser helps clients to plan ahead
Henry said that he and his team contacted clients well before their fixed rate expiry date and used a range of strategies to help alleviate cost pressures.
Examples include looking at the possibility of a refinance, asking the existing mortgage provider for an incentive for the borrower to remain a loyal client (e.g. a cash retention or to match a market-leading rate), and looking at whether a client’s existing loan structure remained “fit for purpose”.
Split loan terms remain common
Henry said that in the current environment, his team were frequently seeing clients split their mortgage across one-year, 18-month and two-year fixed rates.
First home buyers were more inclined to put a chunk of borrowing on a three-year fixed rate for more stability but were also open to placing a portion on a shorter fixed term rate, he said.
“With more information at their disposal nowadays, clients are more than happy to take calculated risks, as long as they understand the positives and negatives with each choice,” Henry said. “Unfortunately, one size does not fit all in the industry, so there has to be huge trust between an adviser and the client.”
Are increases to fixed mortgage rates impacting your clients and how are you assisting them? Share your thoughts in the comments section below.
