Home loan rates have been remarkably stable over the past month, but they may be all about to change. Not because markets are moving but because the big lenders are about to start their spring promotional campaigns.
Already we have seen HSBC offering discounted rates as part of its campaign.
Other lenders are expected to roll out their offers in the next week or two.
The other trend that is developing is that some of the special deals being promoted, such as Kiwibank's five-year rate of 6.99%, have conditions attached.
Many of these conditions include minimum loan sizes and requirements that around 20% of the loan is made at a floating rate. This strategy means that lenders are still making decent margins, as floating rates have risen much more quickly than fixed rates in the past two years, and they will not come down until the Reserve Bank starts cutting its official cash rate.
It is not expected that the bank will move to a loosening stage until around the middle of next year. When it does the cuts are likely to be only 0.25% at a time.
The unknown factor is what happens after the election as both major parties are offering policies that will pump large amounts of money into the economy. This could have the affect of keeping interest rates high.
Currently there is very little difference between two and three year fixed rates. The lowest rates in both areas are 7.45% and the highs are 8.25% and 8.10% respectively.
One-year rates are currently pitched slightly higher ranging from a low of 7.60% up to 8.40%.
The other area where there have been significant rate changes is in what is called the no financials, or lo-doc, home loan market. These are loans for people who don't qualify for prime home loans, due to factors such as being self-employed, recent arrivals or those with a checkered credit history. A number of lenders are now offering these borrowers standard rate loans, with rates that are generally 10 to 20 basis points higher than those in the rest of the market, reflecting the extra risk that the lender is taking on.
For a full list of rates go to www.goodreturns.co.nz
Philip Macalister is interest rate commentator