Mortgage interest rates are on the move
New Zealand mortgage interest rates have been steadily decreasing since August this year. But in recent weeks, the downward trend has picked up pace; at the time of writing, some banks have a two-year fixed rate of 5.69%. Finally, bank rates are well and truly down! This is a significant change from the two-year rate that hung around for most of 2024.
Banks have lowered their lending test rates
Changes in interest rates are always headline news in the mortgage industry. Lending test rates are less discussed, but are often very important for borrowers, as the rates determine how much they can borrow.
Lending test rates are hypothetical interest rates used by lenders to stress test whether an applicant could afford to continue making repayments, should home loan rates increase. The rate is always higher than actual interest rates to ensure the loan remains affordable if interest rates go up. So, the higher the lending test rate, the less an applicant can borrow.
For most of 2024, the banks’ lending test rates were around 8.95%. Now, alongside the reduction in interest rates, they have significantly reduced their lending test rates to around 8.00%.
This is big news; with lower test rates, lenders can now offer more attractive borrowing conditions, which means that many house hunters can access a larger loan than previously. This is significant for many first-home buyers who were previously unable to enter the market, but who will now be able to borrow enough to purchase a house.
The impact of lower interest rates
Between the lower interest rates and lending test rates, first-home buyers have market conditions that are more favourable than those seen for some time. As affordability improves, we’re seeing a surge in interest from first-time buyers eager to get into their very own homes. A real sense of FOMO has returned to auction rooms, and we’ll no doubt start to see more homes sold by auction as a result.
If interest rates continue to trend down as expected, demand will heat up, particularly in areas where first-home buyers are keen to settle down. This could mean an increase in house prices, in which case sooner rather than later would be the best time to enter the market.
Let’s get you into a home
If you’re considering buying a home, now might be the perfect time to take that leap. But the adage ‘look before you leap’ is right! Expert advice is critical to understanding your options and getting a mortgage, with the best possible conditions. At Platinum Mortgages, we manage your mortgage for you, from getting pre-approval to setting up your mortgage and then ongoing support as it comes time to refix, upgrade, invest, or downsize.
We support you over the life of your mortgage, ensuring that you are making the most of it!