Servicing Rate Cuts
Several banks have cut their servicing rates recently, with more expected to follow, and advisers believe such changes will mean more for borrowers than low rates do.
1 October 2019
Historically low interest rates have been the focus since the Reserve Bank slashed the OCR to 1.0% in August, but the banks’ servicing tests remained tough – limiting access to loans.
Now, that seems to be changing: Of late, there have been changes in servicing rates from ASB, ANZ and BNZ.
Mortgage Supply Company’s David Windler says that each of these banks have reduced their rates from between 0.5% to 0.8%, which is good news for borrowers.
This long overdue easing of credit will lead to increased borrowing capability for all applicants and it also puts the banks’ actual servicing rates more in line with the advertised rates, he says.
“We still have many layers of obligations around not putting people into more debt than they can keep on top of.
“So it is not a change that will put people in a position of vulnerability. It is a reasonable adjustment which is about right, I think.
For Go2Guys Mortgage Brokers’ Campbell Hastie, the reduction in servicing rates – which he suspects will be followed by more from other banks – are likely to have a bigger impact than the interest rate drops.
That’s because it doesn’t matter how cheap the money on offer is if borrowers can’t get their hands on it and the tighter servicing rates meant it was necessary to jump through hoops to get it, he says.
“These changes make it easier for more borrowers to access some of that cheap money. More people will be able to buy a property. Others will have more scope to buy something just that little bit better.”
Both Hastie and Windler believe the changes are likely to prompt increased property market activity going forward.
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