Here’s the real reason mortgage interest rates are falling

Late last month the Reserve Bank released a new OCR forecast. It now thinks it’ll take the OCR lower and for longer. 

The market didn’t expect that. It was a surprise. 

That shocked interest rate markets into action.

And that’s why the swap rates fell overnight. 

That meant it was cheaper for banks to borrow money and lend it to you and me for our mortgages.  

That’s how we get those new, lower interest rates.

How to tell if interest rates are about to fall (even more)

Now, I have been thinking, ‘Are the banks holding out on us? ’ 

Since it’s costing them less to lend to you and me … are they hoarding margin? Are they keeping rates high just to make more money?

That’s not what I’m seeing. 

Here’s the difference between ANZ’s 1-year and equivalent wholesale rates. 

ANZ are basically at their 2-year average. 

So it doesn’t look like they’ve saved up a lot of margin.

Don’t expect a new round of cuts before the new OCR announcement.

And that’s also why the discounts have dried up. 

The average bank is advertising a 1-year rate of 4.75%. 

Behind the scenes, they are only discounting this down to 4.72%. Not a lot at all. 

Instead of doing back-room deals, the banks are just cutting their rates publicly.

The money moves Kiwis are making

Right now, investors and homeowners are making money moves to get a better deal. 

Over the last week:

• One investor switched banks to get a cashback payment. He got paid $6,300 from the bank when he moved his mortgage to them. 
• Another investor didn’t want to switch banks. So I talked to their lender and got them $2,400 ‘retention cash’. That’s when the bank knows you could switch to someone else. So they pay you to stay.
• Another investor used the Debt Destroyer strategy. So they borrowed $15,000 against their house to pay off other debt. That meant their interest rate went from 10.5% to 4.8% on those loans. 

So if you’ve got an interest rate coming up … and want to make some mortgage moves …

let me know your situation.

I’ll come right back to you to see if my team can help.

Cheers,

Pete