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After successive reductions to the Official Cash Rate in New Zealand, many banks have started reducing home loan interest rates. This has included floating (or variable) rates, which some customers prefer for the flexibility they can offer.
At The Co-operative Bank, we’ve seen an increasing number of customers opting for shorter fixed rate terms or floating rates in recent months, with market expectations that interest rates will reduce further through 2025.
The proportion of customer balances on floating rates have been relatively static for some time, with most borrowers in the New Zealand market preferring fixed term rates, but floating loans at The Co-operative Bankhave jumped up by 48% since September. This is a different dynamic to some other countries, such as Australia, where floating rates tend to be the norm.
Similarly for the wider market, Reserve Bank interest rate data shows a 53% increase in owner occupied mortgages on floating rates in September-October compared to the same time last year.
The Co-operative Bank has responded to this customer need for flexibility by reducing its floating interest rate to 6.95% – putting The Co-operative Bank’s floating rate at the lowest in the market (as at the date of this article).
We want to give the best rate we can to customers who are looking for more options right now, so this helps customers with the flexibility to choose between fixed term and floating rates while they work out what is the best longer-term option for them.
This rate also applies to our revolving credit loans, which could be a timely option to support any holiday projects customers may be thinking about.
While locking in a fixed rate will be right for some customers, and floating or borrowing a bit more on revolving credit will be right for others, we encourage all customers to talk with their bank or mortgage broker to help them decide on the best option for themselves. For example, the lowest short-term rate might not always be the best option, versus the certainty of locking in for a longer term.
It is important to be aware when considering whether to fix or float, that fixed rates are based on a future outlook, so these typically factor in expected cuts before they occur. That could mean fixed rates may not fall much further, even if there are further cuts to the Official Cash Rate in the New Year.
Taking out a home loan or deciding if or when to refix or float can be a big step. You should feel comfortable to ask your bank or mortgage broker as many questions as you want. Getting help and advice from people who understand the options is invaluable – making the decision easier, and it may even save you money.
If you’re looking for a new home loan or revolving credit, or considering whether to refix or float, take a considered look at all the options and seek out advice from experts like our specialist lending team at The Co-operative Bank.
THE COOPERATIVE BANK DISCLAIMER: The views expressed in this article are for general information purposes only, do not take into account your individual circumstances and are not financial advice.
Jon Armour
Jon is Chief Product Officer at The Co-operative Bank – which is committed to helping New Zealanders bank better. Jon’s role is to ensure The Co-operative Bank’s customers have the best banking products available.
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