Home loan interest rates have fallen below 2 percent for the first time – if you are a Heartland Bank customer.
It offers a one-year fixed interest rate of 1.99 percent. By comparison, the four major banks offer one-year rates of 2.55 percent.
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The bank has developed a digital home loan platform that allows people to apply completely online. It was tried out in March and is now fully launched.
There are also options with a fixed term of two or three years, for which customers can get rates of 2.35 percent per year and 2.45 percent respectively.
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Heartland Group CEO Jeff Greenslade emphasized the benefit of its digitization strategy and the funding flexibility its group structure offers when announcing Heartland’s 2020 financial results.
“Digitalization means low onboarding costs, which can be passed on to borrowers. It also means speed – an answer can be given in minutes, so customers don’t have to go through the lengthy processes of regular banks. In addition, Heartland’s group structure offers it broad financing flexibility.”
To be eligible for Heartland Home Loans, customers must refinance or purchase a standalone home on a single portion in a major New Zealand center, have a down payment or equity of at least 20 percent, and plan to to live at home.
In general, retail interest rates are historically low. It had been predicted that if the official cash interest rate falls below zero next year, the mortgage interest rate would fall below 2 percent.
Banking expert Claire Matthews of Massey University said it could encourage other banks to move.
“To some extent, the response of other lenders will depend on the amount of money Heartland will make available. I would expect the other lenders to revise their interest rates and there could be some movement in response, but I’m not sure the banks will match these rates.”
Economist Brad Olsen said it could encourage borrowers to shop around.
“I expect the major banks to wait for a loan financing package to be announced by the Reserve Bank, which is expected to happen in November. Most retail banks will have plans to cut interest rates at that point, and once an FLP is announced, it will be a race to see how fast and how low the major banks take mortgage rates.”