Cheap loans on the way out again

Home buyers yet to secure a “historic” low mortgage rate are close to missing out as three of the four major banks bump prices back up and experts warn the deals aren’t likely to be back any time soon.

ANZ fired the first shot in last month’s mortgage war by offering the lowest rate by a major bank since just after World War II with a fixed oneyear term of 3.95 per cent.

Westpac and ASB soon matched the deal with one-year rates of 3.95 per cent, while BNZ offered a twoyear deal at 3.99 per cent.

But from today ANZ, Westpac and BNZ will all raise their rates back above 4 per cent, with ASB the only big bank still offering 3.95 per cent.

Loan Market mortgage adviser Bruce Patten says the low rates — always intended as short-term spring promotions — had sparked a rush among home buyers that made last month one of the busiest for the brokerage in the past 18 months.

But while he’d like to see the banks extend or revive the deals early next year, he wasn’t “holding my breath we’ll see them coming back” soon. This was because bank profit margins were being squeezed, he said.

John Bolton, the chief executive of Squirrel Mortgages, agreed the ultralow rates weren’t likely to last, saying bank margins on home loans last month fell to their lowest in five years.

This was due to the banks offering cheaper home loan deals at the same time as their own borrowing costs edged up slightly.

Like Patten, he warned that procrastinating home buyers could easily miss out on the low rates.

“In Australia, mortgage rates have been below 4 per cent for years, so it’s easy to get complacent and presume these rates could continue.

“However, this belief is flawed.” Yet Bolton also said good home loan deals were still available, with ANZ offering a one-year fixed term from today of 4.05 per cent, while BNZ’s rate was rising to 4.1 per cent and Westpac to 4.15 per cent. He said there was little difference between a oneyear term on 3.95 per cent and one at 4.05 per cent. He typically preferred the stability of three-year fixed terms at about 4.3 per cent with cashback offers anyway. Many smaller lenders were still offering home loans below 4 per cent. Bolton said the major banks had entered into a mortgage war in November for a number of reasons.

In November home-buyer activity picks up after winter and many people’s fixed-term mortgages expire, forcing them to look for new deals.

But while Patten said the low rates had sparked a rush among new home buyers and those refinancing existing mortgages, it was still too early to tell if this had boosted house prices.

ASB chief economist Nick Tuffley expected the low rates, which had been falling since about August, to likely to lead to more house sales in Auckland but not a rise in prices.

This was because any price push was likely to be stymied by an “ample” supply of housing.

For more property news and listings go to: OneRoof.co.nz