Looking towards 2019: interest rates and OCRs
For those looking to buy a house in 2019, or are those still on the fence, we have decided to have a look at the current state of the market and look at some positives, and to help teach you a little bit about what is currently happening within it.
In this second edition we look at interest rates and OCRs and their effect on entering the market.
At the beginning of last year the reserve bank dropped the official cash rate (OCR) which many predicated would have a positive effect on interest rates – which were already beginning to hit record lows. This has been backed up by a report from ASB , which revealed that the low OCR has been a major factor in the record low interest rates. In early February the Reserve Bank revealed the the current OCR will remain as is for the time being, suggesting that banks will potentially keep interest rates low to the foreseeable future.
It is important to do your due diligence when looking into mortgage rates, especially in times like this where banks are essentially battling to get new clients through low interest rate mortgages. Since the end of last year, and more so this year, banks have been engaged in a so called “mortgage war” that has ignited in part to the low and steady OCR and the lowered LVR. It began with ANZ – the country’s largest bank – who offered a one-year fixed term rate of 3.95 per cent – the lowest offered by a major bank since just after World War II. Soon after, other banks followed with ASB and Westpac matching it and BNZ offering 3.99 per cent over two years fixed. Kiwibank joined the ranks, offering a two year fixed term rate of 3.99 per cent.
These record low rates and competitive draw cards can be alluring for a first-time buyer, but many come with some catches, the devil is always in the details. The last thing you want it to get yourself in a contract that you can realistically afford, or that doesn’t suit your goals. A great way to pre-approach going for a mortgage is evaluating your current savings, debt, assets and income to evaluate which interest rate and bank is right for you. Having a third party such as a mortgage broker on board is a great way to get a second opinion on your situation, to help plan out your best options and work with the banks with you to get the best deal.