Kiwis adapt to falling OCR with mortgage choices
The latest data from the Reserve Bank (RBNZ) highlighted a significant trend among homeowners opting for floating-rate mortgages.
In January, nearly one-third of owner-occupiers chose floating-rate options for their new mortgage commitments, a notable increase from December’s 23.5% to 31.8%.
This resurgence marks floating rates as the most popular mortgage choice for the month, surpassing even the traditionally favored six-month fixed rates, which saw a decrease from 38.1% to 30%, interest.co.nz.
Short-term preferences amid economic shifts
The trend towards shorter-term mortgages continues, with nearly 90% of January’s mortgage uplifts for owner-occupiers being either floating or fixed for up to one year.
This preference aligns with broader economic indicators and falling mortgage rates in New Zealand, as homeowners anticipate further reductions in the OCR.
Since the beginning of 2024, there has been a strategic shift towards shorter mortgage terms to capitalise on expected OCR declines, which have dropped from 5.5% to 3.75% since August, with additional cuts anticipated.
Economic factors influencing mortgage choices
As rates continue to adjust, and the economic landscape shifts, homeowners and investors alike are recalibrating their strategies to optimise their financial positions.
The majority of new lending to investors in January also favoured floating or short-term fixed rates, emphasising a market-wide cautious approach towards longer commitments, interest.co.nz reported.
Potential long-term trends
Despite the current trend towards shorter mortgage terms, there is growing interest in whether long-term options, such as two-year fixed terms, will regain popularity.
January saw a slight increase in owner-occupiers opting for two-year terms, up from 4.5% in December to 4.9%. This could indicate a tentative shift as banks begin to offer more competitive rates for longer terms, suggesting that some market stabilisation might be on the horizon, interest.co.nz reported.
