- The Reserve Bank held the OCR at 3.25% but signalled a cut next time.
- Mortgage chief suggests homeowners consider changing banks for lower mortgage rates.
- He believes competition might drive rates lower even if the OCR bottoms out at 3%.
Wednesday’s non-eventful OCR announcement by the Reserve Bank could give homeowners breathing space to figure out if they should change banks in their search for lower mortgage rates, says Tella mortgages chief executive Andrew Chambers.
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The Reserve Bank held the OCR at 3.25% but signalled it would cut it next time.
Chambers says some people will have been sitting on expensive floating rates because they thought there might be a cut on Wednesday. They’ll now be wondering if they should risk floating for longer in the hope that lower rates do come through.
His gut feeling is that once the OCR drops to 3%, there might not be any further cuts. “If we don’t see much happening after August, those people should look for a longer-term rates strategy.”
However, even if the OCR does bottom out at 3%, competition between banks might drive interest rates lower. “Because the OCR is a benchmark indicator from the Reserve Bank, it doesn’t mean the banks have to stop if the OCR stops.”
He believes most banks are in a position to give away some of their margin. “They’re in very, very strong positions in terms of their net margin between what they borrow at and what they lend at, so they’ve got room to give away a bit to maintain the level of their balance sheet or the amount of new loans coming onto it.
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“Do we see the top five start to get more aggressive in terms of rates or cash or incentives?”
Deciding whether or not to change banks is not always an easy one to figure out, but Chambers says there is less loyalty to banks than perhaps there once was.
Banks were very similar until you drilled down into the details, like how they treat business owners compared to self-employed customers, or how they handle clients during times of hardship.
Because banks were so similar, when one dropped mortgage rates, the others tended to follow. Some people, especially the financially literate, had no issue switching banks and could often reap a financial benefit, while others sat on their hands, Chambers says.
Tella chief Andrew Chambers believes the big banks will be "more aggressive in terms of rates or cash or incentives". Photo / Supplied
“We do get people every week who go, ‘I don’t really care about the banks. I’ll take the $8000 cash offer, and I’ll do that every three years because why wouldn’t I?’.”
Others were not confident and might even be a little scared of the bank, and that’s where a broker could help.
Sometimes the decision to move banks was about timing more than anything else. “Someone needing to settle quickly and can’t wait four weeks to get an approval – if there’s a bank that can do it in five working days, they choose that bank. It’s as simple as that,” Chambers says.
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