Photo: RNZ
BNZ is the latest bank to cut its 18-month fixed home loan rate to 4.45 percent - but should you take it?
The bank said on Wednesday it was cutting a number of its rates.
Among them, the six-month rate would fall by 10 basis points to 4.79 percent, the 18-month by 4 basis points to 4.45 percent, the two-year by 16 to 4.49 percent and the five-year by 0.4 percent to 4.99 percent.
ASB cut its 18-month rate to 4.45 percent on Monday, which it said at the time was market leading.
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This makes the 18-month rate slightly cheaper than the one-year rate at both banks.
Gareth Kiernan, chief forecaster at Infometrics, said it could be an option that was worth considering.
"You might be able to refix in April 2027, in 18 months' time for about 5.1 percent for two years, which is not a terrible rate."
He said his modelling suggested the best option at the moment was to take the slightly higher one-year rate and then fix for two years late next year before rates started to rise again.
He said there would start to be an upwards drift in rates by about October.
"Over three years, that gives you an estimated average rate of 4.59 percent whereas the average rate for two 18-month fixes might be around 4.75 percent.. Not huge regret, but enough…"
Rates have dropped from more than 7 percent at the peak.
Someone with a $1 million mortgage would have seen their payments drop from about $1500 a week on a 7.3 percent rate to $1162 on a 4.45 percent rate, if they had a 30-year term.
Commentators generally say that the best option is to find a rate that works within your budget and suits your circumstances.
At 4.99 percent for five years, fixing for that time now is only slightly more expensive than a one-year, then two two-year fixes, according to Kiernan's calculation. "So the certainty offered by 4.99 percent doesn't cost a lot more."
Kiernan said his worst call was fixing for three years in early 2015 at about 6.2 percent.
"Even professional forecasters can't always get it right. I've learned to take the swings and roundabouts."
Brokers say banks generally are competing with cash rather than trying to offer lower rates to tempt borrowers across from other lenders.
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