Key Facts

  • Economists at ANZ, New Zealand’s biggest bank, suggest considering a six-month home loan term due to recent falls in wholesale rates.
  • The bank has significantly lowered its two-year and three-year fixed rates driven by the drop in wholesale rates and weak local GDP data.
  • ANZ economists think it’s likely the next move will be a downwards one for rates, therefore, short-term fixes could be more attractive.
  • ANZ advises that fixing for a year and then for another year when that term expires would be cheaper than fixing for two years, assuming the one-year rate stays below 6.71%.
  • While this strategy is riskier as it offers less time certainty, it could save money if rates fall more than 10 to 25 bps.
  • ANZ has lowered its house price growth expectations for next year to 4%, noting the lack of a post-election bounce in the market.

Article Summary

ANZ economists are currently encouraging home buyers to consider a six-month home loan term. This advice is influenced by a significant drop in wholesale rates, combined with weak local GDP data. Consequently, the bank has decided to lower its two and three-year fixed rates. The two-year rate is now at a special rate of 6.89%, while the three-year rate is at 6.75%.

ANZ’s economists believe it’s sensible to anticipate the next shift in rates will be downwards. Therefore, making a shorter-term commitment could prove beneficial in such circumstances. They note that despite the higher cost of longer-term fixes, shorter-term ones are presently more attractive.

From ANZ’s perspective, a strategy of fixing for one year and then another year once the term ends could be cheaper than a two-year fixed period. However, this strategy depends on the one-year rate staying below 6.71% in the next year. While this approach brings less certainty and higher risk, given the expectation of some near-term falls, this strategy could result in savings if rates fall more than 10 to 25 basis points.

Notably, ANZ has revised its expectations for house price growth next year downwards to just 4%. They observed the absence of the anticipated post-election surge in the market.

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