New year mortgage war tipped
PWC expects mortgage lending competition to heat up in the new year with the big five banks tipped to compete on longer-term fixed rate home loans.
The giant accounting firm has issued its latest quarterly banking report noting mortgage lending growth slowed in the third quarter of 2014 for New Zealand’s five major banks ANZ, ASB, BNZ, Kiwibank and Westpac.
PwC partner Sam Shuttleworth said mortgage holders continued to move their borrowing off floating interest rates, and onto fixed rate loans.
At the end of September only 28 per cent of mortgage lending was on floating interest rates, compared to 44 per cent at the same point in 2013, and 63 per cent the year before.
This was a return to more normal historical trends, Shuttleworth said, adding: ‘‘I wouldn’t be surprised to see a lot of competition on three- to fiveyear mortgages when we come back from holidays.’’
He predicted the attraction to banks of locking in longer-term mortgages would lead to some very attractive rates on offer to homeowners.
The slowing of mortgage lending growth resulted in profits growth for the big five which PwC described as ‘‘good, but not spectacular’’.
The margin between the banks’ borrowing and lending rates increased contributing to a rise in combined profit before tax of $144 million during the quarter.
That was a 9.5 per cent rise to a total before-tax profit of $1.67 billion, compared to $1.52b in the second quarter.
Competition on mortgage rates in the new year would limit further margin expansion, Shuttleworth believes.
The slowing lending growth is partly a result of the Reserve Bank’s limits on how many loans the banks are allowed to make to borrowers with deposits of less than 20 per cent.
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