PHOTO: FILE
Home loan rates in New Zealand have dropped below 6% for two-year fixed terms, a popular option for borrowers, but there’s debate on whether they’re a wise choice long-term.
ANZ and Westpac are offering a 5.79% two-year rate, while ASB and BNZ are at 5.89%, and Kiwibank is slightly higher at 5.99%. According to Reserve Bank data, the last time two-year rates were this low was in September 2022.
ASB senior economist Chris Tennent-Brown said these rates were appealing. “Short-term rates would need to drop significantly to make floating or six-month terms a better deal,” he said. Splitting rates across different terms could offer borrowers flexibility to adjust or refinance when lower rates become available.
For a one-year rate to outperform the two-year 5.79%, it would need to drop by about a full percentage point within a year.
Kiwibank’s chief economist Jarrod Kerr predicted more cuts to come. “Rates will drop as the Reserve Bank continues to lower the official cash rate (OCR),” he said. Kiwibank expects the OCR to eventually reach 2.5%, with 25-basis-point cuts at every Reserve Bank meeting through 2026.
Broker Glen Mcleod of Edge Mortgages, however, advised caution on the two-year rate. If OCR cuts continue as expected, borrowers could end up paying more over time by locking in higher rates now.
Mcleod acknowledged it’s a tough time for borrowers. “It’s hard to recommend locking in a higher rate when many are waiting for further cuts to ease financial pressure,” he said
SOURCE: RNZ