More heat on in mortgage market

Mortgage wars are heating up as banks compete for market share in a quieter property market.

BNZ yesterday launched a two-year fixed rate of 3.99 per cent. It follows ANZ’S special of 3.95 per cent for one year. But for borrowers, it might not matter so much what the bank is advertising.

Whether you get a good rate is more likely to come down to who you are and what you’re buying.

Brokers said there were a few factors that determined whether borrowers could get better rates than advertised.

Equity: This is one of the biggest drivers. Without 20 per cent, you won’t even get the special rates advertised. And if you’ve a smaller deposit, the notspecial rate will often also be loaded with low-equity fees and margins.

Loan Market adviser Bruce Patten said the more equity a buyer had, the more favourably the bank would treat the deal.

‘‘If the first-home buyer is over 80 per cent and there is a lowequity margin (which at 90 per cent would be 0.75 per cent) then there could be as much as 4.79 per cent base for two years plus 0.75 per cent so 5.54 per cent, versus say 4.05 per cent so 1.5 per cent difference. [In the] best case over 80 per cent loan there would still be a 0.75 per cent difference between 50 per cent equity and 10 to per cent 20 per cent equity.’’

Servicing ability: Your ability to pay the mortgage is a big deal. If you are pushing up against the limits of their calculations, they won’t fight hard for your business.

Amount you’re borrowing: Banks generally want big deals, and ones where there is the potential for more business down the track. ‘‘The two key factors are the size of the loan and the size of the equity. The best deals for better pricing are $500,000-plus loans and 35 per cent-plus equity will attract the best rates,’’ Patten said.

Willingness to take out other products: Most of the time you have to move most of your banking to get the best deal.

‘‘Multiple products with a bank are often a pre-requisite to getting the super duper rate. So you must have one of a credit card or a savings account or some house insurance or some life insurance. Mortgage customers are a great entry point for additional product sales to create additional margin over time so any interest rate discount can be made up this way,’’ said Campbell Hastie, of Go2guys mortgage brokers.

Membership of a professional association: Groups such as the police, lawyers chartered accountants and other professional groups sometimes have deals with banks which give their members a discount on home loan rates.