COVID-19 Outbreak: what you need to know about mortgage rates dropping in NZ

Date Jul 13, 2020
Blog category Mortgage
By Michael Speight

The COVID-19 outbreak has caused the mortgage rates in New Zealand to drop to an all-time low. Major banks in New Zealand - such as ANZ and BNZ - have announced that interest rates have been lowered to 3% on a 12-month or 24-month fixed term contract. This is in direct response to the Reserve Bank statement, reassuring that the Official Cash Rate (OCR) would remain steady at 0.25%. Numbers are likely to increase again soon, and the economy will eventually bounce back… but what does this mean for Kiwis like you? In this blog, we'll discuss how this mortgage rate drop will affect New Zealanders. 

1. Possibility of even lower mortgage rates

RBNZ deputy governor Geoff Bascand said that the OCR cut is a smart move in helping the economy, but it’s not enough. Lenders and banks need to step up so that home loan borrowers can feel the effects of the cut. The Co-operative Bank, Westpac and ICBC still have interest rates above 3%. If other lenders can lower their rates, these banks can definitely follow suit. As NZ strives harder to boost the economy, there is a high chance that these banks will decrease mortgage rates in due time.  

2. Enable Kiwis to help the economy

Ben Kelleher, ANZ managing director for retail and business banking, said that they want to put the money of New Zealanders back in their own pockets by lowering mortgage rates. This is to enable them to help the economy by purchasing goods and services in New Zealand. In a low-interest-rate environment, Kiwis are encouraged to spend more. This, in return, breeds the economy to grow as cash flow is vitalised. For some New Zealanders looking to purchase a home, this environment can surely benefit them.  

3. Tighter credit policy after pandemic

At the start of the month, RBNZ announced the removal of loan-to-value ratio (LVR) restrictions for mortgages for 12-month contracts. This means that banks can’t use LVR to decline Kiwis who applied for mortgage deferral this pandemic. While this might seem like a good offer, it can result in a tighter credit policy from banks. This is because the main focus of these lenders is not only to sell, but to sell securely in post-pandemic NZ. For Kiwis, this creates an illusion that they can easily own a home at a cheap price.  

4. Owning a home while mortgages are low

As mentioned, this low-interest-rate environment is not all positive. Kiwis may be lured into buying a house while not considering the overall living costs. Some may also be persuaded to buy a home, not realizing how big of a long-term commitment it actually is. On the other hand, this environment can be used to your advantage. If you have a stable income amidst the COVID-19 outbreak, now is the time to start your real estate investment. Just make sure to consider all factors before finalising your decision.  

Get a mortgage deal tailored for you

If you qualify to own a home, make sure you get the best mortgage deal out there. Not all mortgage lenders will be the right fit for your needs, so it’s worth shopping around. The easiest way to score the best rates is through comparing mortgage deals. You can use our comparison services here at Glimp to get the best mortgage deal for you during these somewhat uncertain times. Just let us know a few basic details - like how much you need and how much you have to deposit - and we’ll give you a tailored result in just a few clicks.

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