Today, we want to talk about the ongoing interest rate war among banks in New Zealand, and what it means for customers who are looking for fixed-rate loans.

It all started when BNZ launched a 1-year fixed rate of 4.99%, which was soon matched by ASB. Then, ANZ upped the ante by launching 18-month and 2-year fixed rates at 5.99% with a 1% cashback. Even the Bank of China has now joined in with some attractive promotions.

So, why are the banks engaging in this price war? The main reason is the drop in the real estate market, stricter bank policies, and a decrease in the number of new loans. Banks are finding it hard to reach their expected sales targets, so they are willing to sacrifice profit margins to quickly increase their business volume.

As mortgage advisors, we believe that the banks have not considered all factors in this promotion. Firstly, they did not notify us of these promotions in a timely manner, which affects our ability to advise clients. Secondly, even the banks' existing customers find it difficult to obtain the same discount interest rates when their loan matures. Some customers are able to obtain special interest rates and cashback from the bank, but most are unable to. Banks' current approach is unfair to their loyal customers as they are not treating them equally.

If you missed out on these promotions, don't be too anxious. We believe that interest rates will remain at this level for the next few months, as the banks' loan policies are unlikely to loosen in the short term. The cost of medium and long-term loans has also decreased, which means that there will be plenty of opportunities in the future.

For those who are considering a fixed loan, we suggest not choosing a term that is too short. We believe that New Zealand's inflation is still high, and the Reserve Bank will increase interest rates, it's just a matter of when and how much. We think that 18 months is a good option, as it has a lower interest rate than a 1-year term and is a relatively safe duration. According to economists' predictions, interest rates should have come down by then.

In conclusion, choosing a fixed loan depends on your personal situation and plans. There is no one-size-fits-all answer. If you need one-on-one advice, feel free to contact us anytime. We will provide you with specific advice based on your situation. Our number is 09 930 8999.

We hope this post has been insightful for you. Stay tuned for more updates from our blog.

Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.