APR 11 2019

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Should I fix my mortgage to a three-year fixed term to capture lower interest rates of 3.95%?

Posted by: Connie in Interest Rates

In April 2019, New Zealand mortgage interest rates war reignites. The current three year fixed-term mortgage rates of 3.95% hit the lowest in New Zealand interest rate history. It’s the best home loan interest rates ever. So should I re-fix my mortgage? How long should I fix my mortgage for 2019? Will New Zealand mortgage rates go down again in 2019? Some economists shared their forecast on NZ mortgage rates in 2019. Also, Are New Zealand mortgage rates higher for an investment property? As far as we know, one New Zealand major bank may offer different rates to residential owner occupied and investor.

Should I fix my mortgage to a three-year fixed term to capture lower interest rates of 3.95% in New Zealand?

April 2019 Mortgage rates update:

In March of 2019, New Zealand mortgage rates reached a historic low as major banks offered a one- or two-year fixed term rate of 3.99%. Shortly later, the mortgage war reignited. At the start of April 2019, ASB introduced the market-leading three-year fixed home loan rate of 3.95%, quickly followed by other New Zealand’s major banks - BNZ and Westpac.

1. How long should I fix my mortgage for 2019?

The answer is: it depends.

If you have a large amount of loan, you might need to consider fixing some part of your loan with a long-term period. It helps you to minimise the risk of loan repayment. This is because this strategy will allow you some time to prepare if the interest rate goes up in the future or if you experience financial difficulties.

If you have a small amount of loan, you might need to consider fixing your loan with a short-term period. No one knows if the interest rates would rise or drop down in the future. For example, if the mortgage rates drop down again in the end of 2019, you might want to break you fixed-term loan and capture the low interest rates. In this situation, you should not only consider the potential advantages of doing so, but also ensure that the benefits outweigh the costs.

2. Will New Zealand mortgage rates go down again in 2019?

The answer is: it depends on the published OCR offered by the New Zealand Reserve Bank.

Some economists predict that the New Zealand Reserve Bank would decrease OCR (Official Cash Rate) in this May or the end of 2019. The OCR directly affects the banks’ lending cost. If the OCR decrease as predicted, the fixed-term mortgage rates will drop again.

3. Are New Zealand mortgage rates higher for an investment property?

At Prosperity Finance, we keep good relationships with many New Zealand’s banks. As far as we know, one New Zealand major bank may offer different rates to residential owner occupied and investor. This is because they believe lending for residential investment property carries a higher risk for banks compared with lending for owner occupied properties.

For example, one client of us didn’t get the lowest fixed term rates from a bank. This bank replied that they could not offer the lowest rate to this client because this client only had one investment property secured by this bank.

If your home and your investment properties are not secured by the same bank, we highly recommend you take the opportunity of the current lowest fixed-term rate and fix your investment properties to a longer period. No one of us would know if other New Zealand banks would follow that bank in the future.

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.