Few bite BNZ bait

Bank of New Zealand is the most interesting, in that it once again cut its no-frills two and three year rates 10 basis points each to 7.45%.

Despite this it is not the cheapest in the market.

KiwiBank is offering a two-year rate 10 basis points lower at 7.35%.

What is most interesting is that BNZ's current Unbeatable campaign is a little lower key than previous ones and none of its direct competitors are biting this time.

During the week there were no changes to either floating, six month or one-year fixed rates.

What's the best deal at the moment?

The jury is agreed that fixed term home loans are best - floating at their current high rates make little sense. However they are split on the term.

Economists such as Westpac are favouring one to two years fixed, while others such as BNZ are tipping two to three year fixed rates.

With upwards movements in the swap market (where banks gain their funding for home loans) the cost of providing two-year funding rose last week. BNZ economist Tony Alexander makes a good point for borrowers to consider.

Four and five year rates have been falling and are in the low end of their historical range. Because the US Federal Reserve is expected to up its cash rate this year the current rates are unlikely to last.

"While we favour the two and three year fixed rates, the 7.6% rate on terms four years and over is actually quite good."

Only a small proportion of lenders offer four-year rates. What is on offer is all clustered in a tight range from a low of 7.60% to 7.80%, with the banks being at the low end.

Two small lenders, Silver Fern and NZ Mortgage Funds, fall outside this group at 8.11% and 8.23% respectively.

Five year rates are offered by a greater number of lenders. They range from Asteron's 7.40% to NZ Mortgage Funds 8.21%.

To compare home loan rates go to http://www.goodreturns.co.nz/section/200.html

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