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OCR has dropped - Is it time to fix???

December 10th, 2015.

At 9am this morning the RBNZ cut the OCR to its lowest point ever (back where we were after the Christchurch earthquakes) however has signalled that it is likely to hold it there until the end of 2018. Note that while this will result in a drop in bank floating rates and potentially the shorter term fixed rates such as the 6, 12 and maybe 18 month rates it is not likely to translate into further decreases in the mid to longer term rates.

The US equivalent to the RBNZ which is the Federal Reserve is expected to raise rates at their next meeting which is next week. This may start to put some upward pressure on the longer term fixed rates in particular.

Note also another point which has gone under the radar a bit because of the attention focused on the 30% deposit rule targeted at Auckland property investment, the Brightline tax rule introduction and the new requirements in regards to needing both a NZ IRD number and a bank account to be able to purchase property has been the requirement of the banks to hold more capital if lending on investment property.

This change was bought in on the 1st of November but so far banks still don’t seem to be differentiating their pricing as to whether it is an owner occupied or an investment loan. The one exception to this I have seen was SBS who had their 1 year 3.99% special which only applied to owner occupied loans. Note that in Australia where the change has also happened there can be differences in the rates of up to 0.4% (see CBA’s rates here as an example) and quite clear differentiation between the two classes.

The banks are very competitive at the moment and focus seems to be on market share more than profitability however at some stage expect for the additional costs to be passed on.

Because of the above I believe it is a good time to fix and I’d definitely a fan of the 3 year rate at the moment with it in most cases being priced similarly to the 2 year rate and well under what the 4 and 5 year rates are often getting quoted at.
 
If you are floating or have a fixed rate due to expire shortly and would like us to assist in getting rates quoted please email Jenna HERE and she will work with me to negotiate on your behalf. Please include the loan amount, account number and roll over date in your email.
 
Alternatively, in some cases it is worth assessing if you are fixed for a while yet on whether you should break your existing loans while the rates are low. If you would like us to do this and to conduct a break fee analysis please email HERE.

In this case please provide the loan amount, account number, roll over date and the current interest rates that you are on.
Please note that with some of the banks being slow in their turnaround time that if you would like us to action this prior to Christmas we need this information no later than next Wednesday the 16th of December.

Contact us today on (09) 486 4719 or email on info@krispedersen.co.nz if you would like to talk to one of our team about reviewing your mortgage.

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