Experts predict that interest rates in New Zealand could drop to less than 5%, fuelling a mortgage war and the country’s already surging property market.
While at one point it was widely expected that 2015 would bring rising rates, the Reserve Bank has shifted its message and the official cash rate is on hold for now. The lowest rate offered in New Zealand was Kiwibank’s 4.79% back in 2013 but property financier James Kellow expects to see a repeat of that this year.
“Our retail banks will be keen to maximise their market share and home loan volumes. They will follow the wholesale funding market with interest rate cuts as sure as night follows day,” he says.
Kiwibank recently introduced a new five-year home loan rate of 5.89% for buyers with a deposit of at least 20%, some 60 base points lower than its previous rate, with other lenders following suit with sweetened deals.
Mortgage broker Glen McLeod agreed lower rates were possible. “If the Australian Reserve Bank drops their rate, that will put a lot more pressure on ours to go down.”