Recordlow homeloan rate of 1.99%

AUCKLAND: Heartland Bank has released the lowest homeloan rate in New Zealand history.

The bank yesterday announced a oneyear fixedloan rate at 1.99%.

To be eligible for Heartland home loans, customers must be refinancing or buying a standalone house on a single section in a major New Zealand centre, have a deposit or equity of at least 20% and intend to live in the home.

In addition to this recordlow rate, Heartland is also offering a fixed twoyear rate of 2.35% and a threeyear rate of 2.45%.

With the official cash rate sitting at a record low of 0.25%, banks have been dropping their homeloan rates lower and lower.

Heartland Bank chief executive Jeff Greenslade attributed the low rate to the bank's digital strategy.

‘‘Digitalisation means a low cost of onboarding, which can be passed on to borrowers. It also means speed — an answer can be given in minutes, so customers don't have to endure the lengthy processes of mainstream banks,’’ Mr Greenslade said.

‘‘Moreover, Heartland's group structure provides it with broad funding flexibility.’’

Heartland said the offer would be available for a limited time only.

This will no doubt place added pressure on the nation's other banks to also drop their home loan rates.

SBS bank has also upped the competitive stakes with a rate of 2.49% for 18 months, two years or three years.

The smaller banks appear to be taking the fight to the bigger banks, which all have higher interest rates.

ANZ, ASB, BNZ, Kiwibank and

Westpac are all advertising a fixed oneyear rate of 2.55%.

The question now is whether one of these banks will join the competitive tussle and also drop their rates.

Recordlow mortgage rates and cashback promotions can be very appealing for those thinking about switching.

However, there are a few factors homeowners should consider before taking the plunge.

Squirrel Mortgages managing

❛ My advice is you have just got to hang out and wait for your fixed rate to

roll over

Squirrel Mortgages’ John Bolton

director John Bolton has previously said New Zealanders need to crunch the numbers before switching.

‘‘It is very rare these days for it to make financial sense to break a loan,’’ Bolton said.

Bolton said rates falling to new lows would not help people who fixed a year ago when they were around the high threes or low fours.

‘‘Rates going lower just makes it worse for them.’’

‘‘My advice is you have just got to hang out and wait for your fixed rate to roll over.’’

Break fees are calculated using a complex formula which is slightly different for each bank.

It basically works out how much a bank will be out of pocket by not having the interest you agreed to pay them as part of the fixedterm agreement.

Banks are not allowed to make money off break fees but are allowed to ensure they are not out of pocket.

Borrowers can find out exactly what the break fee will be by contacting their bank although mortgage brokers and interest.co. nz offer break fee calculators that can give a guide. — The New Zealand Herald