Economist: Loan war unlikely
A second major bank has lowered its one-year mortgage rate to a 2.29 per cent ‘‘special’’, with ANZ matching last week’s 20-basispoint reduction by Westpac.
The record-low interest rate required a minimum 20 per cent equity and an ANZ transaction account with salary direct credited. ANZ’S standard oneyear rate was 2.89 per cent.
TSB was also offering the same rate as Westpac and ANZ, as part of its policy to match home loan rates advertised by Australian-owned banks.
ASB and Bank of New Zealand’s one-year fixed rates remained at 2.49 per cent, while Kiwibank’s one-year rate was 2.55 per cent, and Heartland Bank’s was 1.99 per cent.
But mortgage rates were unlikely to go much lower, amid fears of pushing New Zealand house prices further out of reach, Infometrics chief forecaster Gareth Kiernan said.
Kiernan did not expect further cuts to the Reserve Bank’s benchmark rate, the official cash rate (OCR), which is currently at a record low 0.25 per cent.
That view had changed in the past month, from expectations in the second half of last year that the OCR would go below zero.
‘‘It reflects just the relative robustness of the New Zealand economy . . . We don’t really see scope for the Reserve Bank to ease monetary conditions any further from here,’’ Kiernan said.
The latest mortgage rate cuts may be the result of the Reserve Bank’s Funding for Lending programme, which kicked off in December. The central bank expected to spend $28 billion on the scheme, which would provide cheap funding to banks to on-lend to customers.
Retail interest rates were closer to the bottom now than three months ago, ‘‘so there might not be a lot more later in the year’’, Kiernan said.
However, he said there was one caveat – the reintroduction of the loan-to-value ratio (LVR) restrictions by the Reserve Bank in March could result in banks struggling to attract lending, which could make the market more competitive.
But a mortgage war would be surprising, he said. ‘‘The trading banks will have the Reserve Bank in their ear saying, ‘Don’t go inflaming the housing market any more than it already is.’’’