Kiwis pick rates to rise but few keen to adjust home loans

Survey shows public interest-savvy, says banker, but passive attitude ‘frustrating’

Seventy per cent of New Zealanders expect mortgage rates to rise this year but a similar percentage are not planning to change their mortgage settings, according to the latest BNZ Financial Futures survey.

The survey — conducted by Colmar Brunton, with a sample size of 2000 — found that most people expected the rises to be less than 1 per cent.

The results were broadly in line with the view of most economists, said BNZ chief executive Anthony Healy. That showed people understood the interest rate environment.

Despite expectations that the Reserve Bank of New Zealand would keep the official cash rate on hold for the rest of the year, there were two factors driving the upward pressure, Healy said.

It was a combination of rising cost offshore, wholesale funding markets and a shortage of deposits and savings in the local market relative to borrowing, he said.

“All the banks are competing for deposits, Kiwis are seeing deposit rates go up but that also puts pressure on lending.”

While it was good to see Kiwis aware of the interest rate trend, it was a concern that the majority weren’t actively managing their mortgages to meet the changes.

The survey found that nearly seven out of 10 people had no plans to change their mortgage.

“We’ve had two years of the lowest interest rate environment in a generation but it is frustrating to see that New Zealanders still seem to have a ‘set and forget’ . . . mentality about their home loan,” Healy said. People had to change their mindset, he said. ANZ’s farmer customers were a good model.

“In tough times they manage their loans carefully, then when they are making more income they pay of their debt more quickly.

“The message is, be active with your mortgage, it’s probably the biggest financial commitment you have so don’t take it casually.”

When people were asked how much time they’d save by making small increases to their mortgage payments they tended to underestimate, he said.

Now was the ideal time to adjust your mortgage and take advantage of the lower rates.

“We’re on the cusp of a change, but it’s not necessarily going to be dramatic this year.”