(Ruoxi’s note: This exclusive guest post by Eugene Bartsaikin, director of Twine Financial Advisers and a Registered Financial Adviser, covers his opinion on the current mortgage interest rate environment and the strategies that homeowners can employ to maximise the opportunities and savings. Although I am personally a fan of mortgage brokers and appreciate the service a good mortgage broker can provide, I have not received and will not receive any monetary benefit from this post or any referral as a result of this post.
Interest Rate Market Update for November 2018
It’s only 8 days away from Christmas and the season of family, friends & laughter is upon us. Usually around this time of year, the crystal ball begins to surface, and clients are often asking me what I think on the property market and interest rates.
Trouble is, I don’t have a crystal ball… and nobody else does either. Today’s focus is on interest rate expectations for 2019. I’ll also show a method on assessing whether a rate is good value or not and how to take advantage of the current interest rates.
Interest Rate Expectations For 2019
- We expect interest rates to remain stable over 2019. 12-month rates have ranged from as high as 4.39% to as low as 3.95% across the main banks this year. They’re currently around the 3.99-4.05% territory and we expect a range of 4.05-4.19% for 2019.
- Best value interest rates will still likely short term – the 6, 12, 18- & 24-month terms.
- There is a possibility of banks extending the property investor interest rate margin by an additional 0.10% over and above the current premiums. BNZ have launched this policy in October 2018 in line with ASB & Westpac. Banks need to hold more capital against property investment properties so therefore recover their profit margins with the added premiums. The recommendation is to extend overall fixed interest rates on your investment lending now to minimize the risk in the market.
- As at time of writing, the current 90-day wholesale swap rate is 2.04%. Even if the RBNZ raise the OCR from 1.75% to 2.00% in 2019/2020 (and there does not seem to be any indication from the latest monetary announcements), this would have minimal to no impact on interest rates. The primary factor in interest rates is the margin allocation towards what the banks deem as riskier loans i.e. investment properties.
Taking Advantage Of All-time Low Interest Rates
With every fixed rate renewal, we are requesting break fees from the lender on all remaining loans. We then compare those break fees with the interest savings from the old rate to the new rate, multiplied by the remaining loan term.
This creates an interest/break fee arbitrage opportunity which sometimes works out in your favour but sometimes it doesn’t. It’s an essential exercise to go through as if it works out well, there can be a substantial saving.
One client this week has saved over $1,500 over the remaining 12 months and we even extended their fixed rates onto a longer period!
At Twine Financial Advisers we specialise in crafting tailor-made mortgage strategies collaboratively with our clients and their team of professionals. Most clients save on average $3,000 – $5,000 upfront from a mortgage review. But the lifetime savings from getting the best rates every time, intertwined with a cohesive mortgage strategy designed to your lifestyle needs, changes the playing field altogether.
Contact Eugene today to get the best financial plan!
Disclaimer: The opinions expressed by the guest writer are his alone, and do not necessarily reflect the opinions of Ruoxi Wang, New Zealand Premium Homes, Ray White Remuera or any employee thereof (together, the Individuals). The Individuals are not responsible for the accuracy of any of the information supplied by the guest writer. This work is the opinion of the guest writer.