The Herald reports:
Fixed home loan rates are unlikely to fall much further regardless of what happens to the official cash rate brokers say.
The Reserve Bank left the official cash rate on hold at 2.75 per cent today pausing its rate cutting moves.
Since June the central bank has slashed the cash rate from 3.5 per cent.
Economists are picking there could be one more cut before the end of the year at the Reserve Bank’s December 10 briefing.
But mortgage brokers doubt interest rates will continue to fall below their current record breaking levels.
“I think interest rates are pretty much at their bottom,” said John Bolton, managing director at Auckland-based mortgage broker Squirrel.
Below are the average interest rates from the Reserve Bank data series.
Now the big drop was due to the GFC, but look how low they have stayed since.
And how much does this matter to a family with a mortgage? Well the median house price is $490,000. Let’s say you have a 20% deposit so you borrow $400,000 on a standard 20 year term.
Here’s what you pay every week at different rates:
- 10% – $889
- 9% – $829
- 8% – $771
- 7% – $714
- 6% – $660
So if interest rates are 6% rather than 8%, then the family is paying $111 less interest a week, which is huge. That’s over $5,500 a year saved.