Rates seem to be at an all time low now.
After the bruises and scratches of the global financial crisis, Australian banks have come back stronger on the global stage.
Here in New Zealand, the gloves are off for the big four and competition is heating up. It is great for the homebuyer or loan fixer looking for a bargain.
Discounts are ripe for the picking but the basics must be observed when haggling for a good rate.
Awareness of the market rate lays a good platform for negotiation.
Your bank needs something to aim for and hence it helps to have a realistic offer from a competitor. A good mortgage broker can help in this department as he or she is often pricing home loans.
Discounts up to ½% are possible in this market and many banks are eager to gain a larger market share and are ready to even absorb legal and valuation expenses on behalf of clients.
The deposit issue has also become flexible. Although banks would ideally prefer at least 20% deposit while granting mortgage loans, lesser percentage would also be allowed in cases where banks either know the client well or feel comfortable with the property concerned.
Differing margins
It is important to note that not all lenders will charge a margin on interest rates with 5% deposit. Some banks also have employee package schemes for large companies, which can make negotiating easier.
Floating rates are discounted along with fixed rates and some banks can even offer a permanent margin off the floating rate.
It is equally important to note the cost of breaking the interest rate.
Some banks use the wholesale rate while calculating the break fee, which can be higher than the retail rate.
With the two-year swap rate at lows and no signs of tightening from the Reserve Bank, it should be a busy summer for the housing market.
There is also some genuine pressure on the housing market in Auckland from lower construction rates and the Christchurch rebuild is poised to make this worse.
It is not unusual to see houses selling at higher than valuation in better areas of Auckland. The fact that banks are easing their lending criteria has encouraged more buyers to enter the market.
Overall, with mortgage repayments not far off the actual rents, this may not be a good time to enter the housing market.
With fixed rates in not such a bad place, buyers have a real opportunity to lock in those pricing discounts for years to come.
Hamish Patel is an insurance adviser for mortgagesonline.co.nz and can be contacted on (09) 6254693. Email: hamish@monline.co.nz
The above should be taken only as a guideline and not as specific advice. A full disclosure statement is available on request.
