It has been another month of rate competition with arguably the largest attention going to Kiwisaver provider Simplicity’s entry into the mortgage industry with a market leading 2.95% rate. What was of particular interest with this was that unlike other leading rates which were fixed rates, Simplicity has an offer which is based on a floating rate. With an initial plan of $50m to be lent over the first 6 months it remains to be seen if this will expand outside of being a clever marketing ploy as this amount won’t even register considering the actual size of the New Zealand mortgage market.
Outside of this we have seen most other banks interest rate offerings continuing to trend downwards with SBS coming to the party at the time of writing with a competitive 2 year rate of 3.39% and also offering a cash back incentive at the same time.
This point is worth noting as it is not just the rate that borrowers should be looking at when considering pricing although in many cases a cheaper rate will be better over time than an initial cash injection up front.
Overall when looking at the Australian backed banks and the New Zealand banks this isn’t much in it and so other factors such as facility types and the ability to structure mortgages in particular ways should be taken into consideration. Some lenders are also looking to price investment margins on top of quoted rates for property investment loans although this appears to be able to be negotiated on in many cases at present.
The Chinese banks again are leading the way with Bank of China, ICBC and China Construction Bank’s fixed rates only have a few basis points between them.
On another note it will be interesting to see what eventuates out of both the next Official Cash Rate review (on the 13th of November) and also two weeks later (on the 27th of November) when the Reserve Bank releases its Half yearly Financial Stability Report. The key point to watch out for will be if the Reserve Bank looks to relax the current loan to vale rule restrictions further as they have done the last two years through the same report. There is a chance they may decide to hold off a further OCR decrease until next year if their intention is to relax with the concern being that both lower deposit criteria and even lower interest rate availability may result in the property market being stimulated more than they are comfortable with.
On the flipside however the probability is that with continued low business confidence and overall growth that they will look to reduce a further 0.25% in the November review meaning we may see even lower rates going into the Christmas season.