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Should you consider your mortgage options? - Canstar

Contributor:
Fuseworks Media
Fuseworks Media

A little over a year ago, it was widely thought that Kiwis were facing a future of rising home loan rates and higher repayments. In reality there has been very little change and there are still some good options available to borrowers. So, if you’re looking at home loans, what are your options and what should you consider?

"After the relatively stable home loan rate environment in 2017, there has been a flurry of activity in 2018 as institutions once again look to attract mortgage business". Comments Canstar’s general manager Jose George. "And while we’ve seen rate tweaks rather than show stopping cuts, consumers looking at shorter-term fixed rate options have had the chance to do well. Since the start of the year, we’ve seen 12 cuts in the 12 to 18-month fixed rate market, as opposed to no changes at all to floating rates."

Interestingly, since the beginning of the year, whilst there has been some activity in the traditionally popular two-year fixed space, the overall outcome is that rates have been largely steady.

George continues:

"With rates widely forecast to remain steady, hopefully until the end of the year, now is as good a time as any for people to be considering their mortgage options.

"Although carded rates are a major factor, it is important to take a number of other things into consideration. Employment status, future plans, envisaged tenure in the current home should all be part of the decision."

What you should consider when looking for a residential home loan:

Your future plans. If you are planning on moving in the next year or so, don’t tie yourself into a longer-term fixed rate deal that you then have to pay a termination fee to get out of.

Stress test. The great rates that are around today, may not be around forever. Always make sure you have some ‘wriggle room’ financially and will be able to accommodate an increase in your home loan interest rate or even a one-off emergency expense. Shop around and don’t be afraid to switch provider. It may sound like a lot of hard work to switch banks but in today’s world of being able to do just about anything online, you can compare and action without leaving the house. In some circumstances, your new provider may also offer you additional incentives to switch. Negotiate, negotiate, negotiate. People sometimes don’t realise that there is often a better deal to be done. Depending on the size of loan you require, the value of your property and your income, you could be offered a better rate than advertised.

Remember to include any fees or costs in your calculations. If you are breaking a fixed rate deal early, there is usually an early settlement fee you will be liable to pay. If switching provider, you may also have to engage legal representation which can cost hundreds of dollars.

Do you have any other savings? These could be offset against your home loan. As interest is usually calculated daily, you still stand to gain even if the amount you have in the offset account fluctuates.

Banks not such traditional lenders

With the appreciation that a home loan is only part of a customer’s financial footprint, in recent years the role of banks has evolved far beyond the function of a straightforward lenders.

"We’ve moved from an environment of banks commonly being considered as staid and unyielding to one where they are now considered innovators and an essential support to financial empowerment." Says George. "Banks have become the enablers, helping customers to make far more informed decision around their finances. Online calculators to help assess ability and amounts to borrow as well as tools to estimate repayments are now commonly available. Coupled with the up-to-the-minute account information that is now also the norm, customers have access to a far more holistic approach to planning their finances and budgets."

Bank of the Year - Home Loans

For the first year, Canstar are awarding an overall Bank of the Year - Home Loans. This award is for the financial institution that has been assessed to give the best all round home loan services and rates to customers across the board.

For 2018, Canstar are pleased to announce ASB Bank as Bank of the Year - Home Loans.

Accepting the award ASB head of product portfolio management Vince Clark says: "ASB is delighted to accept Canstar’s inaugural Bank of the Year - Home Loans award. The ASB team work hard to provide value to our customers by helping them into and managing their home loan. We are particularly pleased with the positive response to ASB Home Central, an online tool we launched last year that empowers customers manage their home loans."

Canstar’s ‘Outstanding Value’ products:

In addition, the following products were calculated to offer five stars for outstanding value:

Category / Product

OUTSTANDING VALUE - FLOATING HOME LOAN

- Residential

ANZ Bank - Floating Rate

Kiwibank - Offset

- Investment

ANZ Bank - Inv Floating Rate

Kiwibank - Investment Offset

OUTSTANDING VALUE - FIXED HOME LOAN

- Residential

ASB Bank - Residential Fixed

Kiwibank - Residential Fixed

- Investment

ASB Bank - Investment Fixed

Kiwibank - Investment Fixed

OUTSTANDING VALUE - LINE OF CREDIT

ASB Bank - Orbit Home Loan

ANZ Bank Flexible Home Loan

For further information and a full list of Canstar Five Star Ratings, Home Loans 2018, please visit the Canstar website - https://www.canstar.co.nz/star-rating-reports/bank-of-the-year-home-loans

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