ASB Lowers Interest Rates, Intensifying Mortgage Market Competition
In a move expected to shake up the mortgage market, ASB has reduced its fixed-term home loan rates, setting a new benchmark among major banks. The 18-month fixed-term rate is now at 5.39%, the lowest available among leading banks. This adjustment highlights the intensifying competition among financial institutions to attract borrowers in a shifting economic landscape.
Currently, all major banks are offering fixed-term mortgage rates below 6%. ASB’s latest reductions include a six-month fixed rate now at 5.99% and a one-year fixed term at 5.59%. These changes come just a day after Westpac adjusted its six-month rate to match a competitor’s offering.
Competitive Fixed-Term Mortgage Rates Across Banks
With ASB’s 18-month rate now leading the market, only select non-major institutions like Heartland Bank offer slightly lower rates. Westpac’s recent adjustments include a six-month special rate of 5.99% per annum, aligning with similar offers from BNZ. Other six-month rates include 6.24% from ANZ and 6.15% from Kiwibank.
Easing Pressure on Homeowners Amid Economic Uncertainty
While the current economic environment remains uncertain, especially with mixed signals from international markets, these rate reductions provide some relief for homeowners. Borrowers moving onto new fixed rates may see lower repayment burdens as the year progresses.
The last major shift in mortgage rates followed the Reserve Bank’s decision in November to reduce the Official Cash Rate (OCR) by 50 basis points, bringing it down to 4.25%. The next monetary policy announcement, scheduled for February 19, is likely to influence further adjustments in interest rates.
Short vs. Long-Term Mortgage Decisions: Expert Insights
Mortgage advisers are closely monitoring the situation, encouraging clients to carefully consider fixed-term options. Many are opting for shorter terms, such as floating or six-month fixed rates, to maintain flexibility ahead of the Reserve Bank’s February announcement.
The prospect of further reductions in longer-term fixed rates appears limited. However, some experts caution that as demand for longer-term rates grows, banks may begin increasing these interest rates to protect margins.
Borrowers are advised to stay informed and weigh their options carefully, as banks remain competitive in offering low fixed-term rates. The prevailing advice is not to delay too long in locking in favorable rates, especially for those considering longer-term commitments.
Outlook for 2025 Mortgage Rates
As 2025 unfolds, the mortgage market is expected to remain dynamic. While borrowers may find some respite from the rising cost of living through lower rates, the broader economic environment continues to play a pivotal role. Staying proactive and seeking professional advice will be key for homeowners navigating these changes.