Editorial: Spring in the step of mortgage market

The inevitable spring rise in interest had begun in earnest with more people looking at properties, particularly those seeking first homes. Photo / 123RF

EDITORIAL

Spring is now locked and loaded for those in the market for a mortgage.

The major banks, thanks to a healthy investor appetite for their bonds, now have the ammunition to fight an interest rate war at a time when rates are already at historic lows.

In July, acting on the earlier indicators of continued low interest rates, Westpac launched a five-year medium-term bond, notionally seeking $100 million but catering for potential oversubscriptions.

Investor demand was such that Westpac ended up raising $900m - nine times the original amount sought - and at an interest rate of 2.22 per cent.

Shortly after, the market was able to see what surprisingly large OCR cut, coupled with fortunate timing, could also achieve for ASB.

The bank set out to raise $100m but ended up with $600m, such was the demand for its paper.

As it turned out, ASB's issue captured the effects of the Reserve Bank's expectedly big 50 basis point rate cut on August 7, which meant it could secure funds at 1.83 per cent - 39bps lower than its rival across town.

So what does all this mean for those scanning the property listings for their next move on the housing market? It certainly means spring will be an important time for borrowers to take a keen interest. It will be as competitive a market as has been seen for some time.

As KPMG, in its latest Financial Institutions Performance Survey, noted: "Being able to lock in such low levels of funding should help fuel the competitive fires ahead of the traditionally active spring mortgage market, with the possibility of further record low mortgage rates being offered."

OneRoof yesterday reported the inevitable spring rise in interest had begun in earnest, with more people looking at properties. Agents anecdotally reported an increase in foot traffic at open homes - and in some Auckland suburbs a lot of those feet are first-home buyers.

Lesley Harris, from the First Home Buyers Club, thought the spring open home flurry was due more to buyers who have been waiting for a property crash now realising there isn't going to be one. "The market's stable, you just have to get in."

One sticking point may be the amount of listings to meet the added interest the mortgage rate scene is already driving. But that is hardly the fault of the banks.

It was not the impending spring - and traditional rise in listings and buyers out calling on open homes - which drove banks to over-supplant their war chests.

In fact, the reverse was the case. Conditions presented themselves, the banks acted prudently to lock in cheap funding, and spring then arrived.

Happy hunting.