Banks have recently begun to offer record-breaking short-term mortgage rates – the lowest in New Zealand’s history.
The rates for Westpac, BNZ, ANZ and ASB have decreased to less than 5% in the past week, while house prices continue to skyrocket; the average price of an Auckland city home is now $735,692, a 12% increase over the past year.
One advisor suggested that house hunters should budget for a rate of 8% though, as these interest rates are expected to rise in the near future – it’s predicted that floating rates will rise up by 1.5% by the end of next year.
Another financial planner says that borrowers should be cautious of these short-term low interest rates: ” What will the interest rate look like when our wonderful rate has expired and we still have many years of repayments ahead of us?” He advised mortgagees to combine floating rates with low short-term fixed rates, and to target at least 50% over three to five-year terms.
Some solid advice for now, it seems, is that budgeting to pay more than the current interest rate will allow borrowers to take advantage of lower rates, while helping to reduce their debt by avoiding unexpected costs in future due to increased mortgage rates.
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