Rates falls ease

All the ASB-related organisations (ASB Bank, Sovereign and BankDirect) have dropped the two-year rate, as has Kiwibank.

Separately, National Bank has launched a new campaign offering cash back on two-year loans.

The few announcements of lower rates last week involved a bank and three non-bank lenders. HSBC and GEM cut all fixed rates, while Cairns Lockie and General Finance dropped the five-year rate.

For borrowers choosing what to do with their mortgage, BNZ chief economist Tony Alexander sees limited scope for fixed interest rates to fall much further in the next few months.

But he doesn't anticipate any substantial cuts in floating mortgage rates in the near future so advises borrowers to fix for two years.

"There is a lot of competition in the mortgage market now as banks retain goals of growing market share yet total market growth is slowing down.

"We have seen this happen before and, while sales growth targets take time to adjust to the weaker environment, one can pick up some very good deals."

Westpac chief economist Brendan O'Donovan says that although it is always tempting to go for the lowest fixed rate on offer, which is currently the five-year rate, he doesn't think this will provide the lowest funding costs over the medium term.

"Most mortgage rates are currently above their historic averages, and importantly the five-year rate is above the long-run average of one- and two-year fixed rates," he says.

"Keep the term of fixing relatively short, so that advantage can be taken of lower rates in the future," he advises borrowers.

On Friday, gross domestic product data for the fourth quarter is likely to give more clues on the economic slowdown, which has caused currency jitters in the last week and will lead analysts to reconfigure their forecasts for what is ahead.

In the marketplace, variable rates start at 8.50% from Napier Building Society and spread to 9.95% at NZ Mortgage Income Trust.

One-year rates are now between 7.6% at Southern Cross to 9.0% from GEM Home Loans.

Two-year terms now range from 7.7% at BankDirect, Sovereign, NZ Home Loans, Kiwibank to Headstart's 9.25%, while three-years vary between 7.5% from Kiwibank and Mortgage Finance to Headstart's 9.15%.

For four years, Pacific Prime and Superbank offer 7.8% and the lenders spread narrowly up to NZ Mortgage Funds' 8.11%.

The five-year range is now between 7.45% from NZ Home Loans and Sovereign to Gem Home Loans' 8.35%.

To compare mortgage rates visit the Good Returns Mortgage Centre http://www.goodreturns.co.nz/section/2.html

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