Key Facts

  • Interest in 18-month fixed term mortgages among owner occupiers has significantly risen, according to latest Reserve Bank’s data.
  • In October 2022, only 4.8% of the new mortgage money taken up by owner-occupier was for 18 month terms, but now it stands at 16.5%.
  • One-year mortgage terms have traditionally been popular, but on occasions, two-year terms have exceeded the one-year terms.
  • The share of new owner-occupier mortgage money for one-year terms have decreased from 33.2% to 25.2% recently.
  • Two-year terms have seen a rise from 23.4% to 24.2% during the same period.
  • The average for a one-year fixed rate stood at 7.26%, versus 7.01% for two-year in October. The 18-month rate falls in the middle with an average of 7.1%.
  • Investors still favourites one-year rate, but 18 months terms are also gaining attraction.
  • New residential lending on fixed interest rate terms decreased slightly to 82.6% in October, down from 82.8% in September.

Article Summary

Recent data from the Reserve Bank of New Zealand show that an increasing number of homeowners are opting for an 18-month fixed-term mortgage over traditional one or two-year term mortgages. Previously, the 18-month term was less popular, but there has been a demonstrable change in sentiment.

One year ago, in October 2022, only 4.8% of new mortgage funds were taken up by owner-occupiers for an 18-month term. However, that figure has now increased to 16.5%. In comparison, the proportion of money taken up by one-year mortgages has decreased, whilst two-year terms are seeing a small uptick from 23.4% to 24.2%, suggesting that these may soon become the preferred choice.

Interestingly, the prevailing rates appear to have had a significant influence on these shifts in mortgage term preferences. Homeowners are displaying flexibility in their term of choice, primarily driven by the desire for better rates. The average rate for a one-year fixed term is currently at 7.26%, higher than the 7.01% for two-year terms. The 18-month term nicely slots into the middle, with an average rate of 7.1%.

Despite this shift, the one-year rate remains the clear favourite amongst investors. However, the 18-month term is also gaining traction in this demographic, demonstrating a wider receptiveness to these intermediate-term mortgages. Overall, the proportion of residential lending on fixed interest rate terms fell slightly in October to 82.6%, down from a record high of 82.8% in September.”

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