Homeowners Choosing One Year Terms as Falling Interest Rates May be on the Horizon

Kiwi Homeowners Choosing One Year Terms As Interest Rates May Fall with Money Compare

Many homeowners are of the belief that before too long, interest rates are going to lower. As a result, many homeowners are choosing to only commit to one year terms – so that they can be ready to jump on those better interest rates should they come around in the next 6-12 months. Analysts, CoreLogic say that in February this year, a record number of homeowners fixed on one year terms

Are Interest Rates Really Going to Lower?

This positive outlook amongst homeowners comes in light of new data showing that inflation had eased to the lowest levels since June 2021. It appears that across the country, house prices were easing after a slight growth in March.

Kelvin Davidson, chief property economist CoreLogic,  said that of home loans taken out in February, 58% were on a one year term contract

Since 2021, homeowners have typically chosen to commit to longer term payments so as to avoid paying higher interest rates as inflation rises. But it appears that homeowners are taking a more positive approach this year. 

However, Davidson warns homeowners not to get their hopes too high, as the possible drop in interest rates isn’t a guarantee. The Reserve Bank hasn’t given any sign that they will be lowereng the official cash rate, as it has remained steady – at 5.5% last week. 

The world is continuing to be rocked by inflation and the cost of living crisis. But there are positive trends around us, such as the smallest price increase in this quarter of the year since June 2021. For example, the latest price consumer price index raised by 4% in the 12 months to the March 2024 quarter. While price increases are small at the moment, and the smallest they’ve been since June 2021, they still sit above that the Reserve Bank of New Zealand would like them to be. Their target range is 1 to 3%. 

Speak to Experts Before Making a Decision

Here at Money Compare, we would urge Kiwi and homeowners to make sure they are making the right decision for them. The markets are constantly changing, and you do not want to commit to a one-year term on just the hopes that rates may lower, as there is no promise that they will. 

It’s important to speak to experts such as a mortgage broker/ advisor, to make sure that you are making the right decision for your unique needs and goals. Remember, a home loan is a massive financial commitment and you want to make sure you are truly getting the best deal possible!

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Compare Interest Rates 

We are all about helping Kiwis get the best deal possible here at Money Compare. Our user-friendly platform makes it easy to compare the different loan interest rates on the market. Make a fully informed decision, and unlock savings that make a difference in your budget. 

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Another Option to Consider is a Mortgage Cashback

Mortgage cashbacks give homeowners a cash payment once their mortgage has been signed off. Typically, the payment is a lump sum of $1000 - $3000, although it could be more depending on how much you are borrowing. These funds can be used for whatever you like, including towards the loan repayment. There are a few caveats to this option, such as being locked into one particular lender for a couple of years. So it is always a good idea to discuss this option with your mortgage broker to see if it is the right option for you. 

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Need Help? We Can Pair you with a Mortgage Advisor

Here at Money Compare, we have a range of experts on hand. If you have any questions about home loans or mortgages – simply request a free call back by clicking the button below and a fully qualified mortgage adviser will be in touch.

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Further Reading:

How to Reduce Your Mortgage

Find a Mortgage Broker in NZ

Friday, 19 April 2024