SBS fixed rate makes the cut

Couple Calculating Budget

Fixed interest rates are back in the headlines as the banks continue their playful arm wrestle -- each wanting to drum up new business by offering lower fixed-rate mortgages along with a few bells and whistles (such as free TVs and cash).

This week Westpac cut its three-year rate from 5.89 per cent to 5.59 per cent. Its five-year rate has also been cut, from 5.99 per cent to 5.75 per cent.

However, the standout fixed rate deal, at press time, has got to be from SBS Bank, offering a five-year rate of 4.99 per cent (that's more like it). Although its two-year rate of 5.19 per cent is also attractive.

The low-profile bank started life in 1869 as the Southland Building Society, and is thought to be the world's first building society (it is owned by its customers).

There's barely any difference among the rates offered by the big four of Westpac, ANZ, ASB and BNZ. The only standout among them is ANZ, offering 5.39 per cent for one and two years -- although the two-year rate is matched by the others (including KiwiBank).

With so much cheap cash sloshing around the global banking system I can't see why more banks here are not offering fixed rates below 5 per cent.

Part of the reason for having some of the highest mortgage rates in the OECD is our comparatively high official cash rate (OCR) of 3.5 per cent.

Over in the UK, where its OCR is 0.5 per cent, Barclays is offering five-year fixed rate mortgages of 2.34 per cent.

If you think the real estate boom is unique to Auckland, think again. With so much cheap cash available in Europe and the US, property prices in most major cities, including those in Australia, are on the up and up as investors with access to cheap loans swoop in.

School zones

If buying a home in the school zone of your dreams is becoming an issue, then take heart from a survey by real estate firm Bayleys.

Its bean counters have done the math and reckon you can save a fortune by buying just outside the school zone you want, and using the money saved to pay for a private education.

It reckons Auckland home buyers can save more than $480,000 by buying a home just outside the boundaries of sought-after state school zones.

Bayleys' Rachel Dovey says: "Analysis of sales data found that where a school zone boundary sliced through the middle of a suburban street, houses within the sought-after school zone were priced up to $272,000 more than their comparable counterparts on the other side of the road."

Over the life of a 20-year mortgage, at a rate of 6.5 per cent, Rachel says the extra $272,000 -- with interest -- comes to $486,710.

However, just because a child is "out of zone" doesn't mean you can't apply for them to attend the school of your choice (you may get lucky).