Window of opportunity in mortgages

There are good mortgage specials on offer – but you might need to be in a comfortable financial position to access them.

Interest rates have been expected to rise for a couple of years but remain stubbornly low.

Research firm Canstar’s general manager, Jose George, said there had been a flurry of activity in the market in the first half of this year.

‘‘While we’ve seen rate tweaks rather than show-stopping cuts, consumers looking at shorter-term fixed rate options have had the chance to do well. Since the start of the year, we’ve seen 12 cuts in the 12- to 18-month fixed rate market, as opposed to no changes at all to floating rates.’’

Mortgagerates.co.nz shows a market median of 4.79 per cent for one year and 4.99 per cent for two.

The big banks are offering specials of about 4.35 per cent for one year.

‘‘With rates widely forecast to remain steady, hopefully until the end of the year, now is as good a time as any for people to be considering their mortgage options,’’ George said. Repayment times

Timeframes on a $400,000 home loan repaid at $1500 per fortnight (advertised rates):

ASB: 1-year – 4.79% ...................... 15 yrs ANZ: 2-year – 4.65% ..................... 14 yrs Westpac: 3-year – 4.94% ......... 15 yrs BNZ: Floating – 5.9% ................... 16 yrs

Mortgage broker Glen Mcleod, of Edge Mortgages, said banks were willing to negotiate.

Bank of New Zealand was offering rates as low as 4.09 per cent for a year, and ANZ had dropped to 4.15 per cent. Cash-back offers were also available.

But it was harder to get deals through because the banks had tightened their criteria, he said.

All the lenders test applications against a higher interest rate than they are currently charging, to make sure that borrowers can withstand a rise in rates. This is reportedly between 7 per cent and 8.5 per cent at the moment.

Mcleod said some of the banks had increased that rate recently.

Others now wanted to see more money set aside in household budgets to allow for food and vehicle expenses.

Bank funding costs have increased but the official cash rate has been at 1.75 per cent since 2016.

ANZ economists said the oneyear mortgage rate seemed to offer the best value in the market.

The average special advertised is 4.36 per cent. The average twoyear special is 29 basis points above that.

‘‘It means that the one-year rate would need to rise by 59 basis points over the next year in order for it to be cheaper fixing for two years at 4.65 per cent than rolling two one-year terms,’’ the bank said.

‘‘While not out of the question, that degree of increase is not our expectation.’’

ANZ said it reviewed its servicing rate quarterly to take into account market conditions.

A Westpac spokesman said the criteria used to calculate an applicant’s ability to service a mortgage evolved constantly.

‘‘It’s not in our customers’ interests for them to have difficulty meeting repayments. Therefore, the lending assessment tries to allow for a range of factors, including changes in borrowers’ circumstances and interest rates.’’

ASB said it had not made any recent changes.