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    Should you refinance?

    Major banks unveil historic low rates in fight for customers.To check whether it’s worth breaking the contract on your current home loan to take advantage of the new low interest rates, you’ll need to ring your mortgage adviser. They’ll tell you how much your fee is for ending your home loan contract early. They can also help you to calculate whether the fee is going to add up to more than the money you will save from reduced interest payments.

    But beware, if the fee is large, you may have to
    add it to your home loan and then pay interest on it as well.

    The Bank of NZ has dropped its two-year fixed
    interest rate to a “historic” 3.99 per cent as it returns fire in a
    burgeoning mortgage war between the country’s lenders.

    ANZ – the nation’s largest bank – offered the
    lowest rate by a major bank since just after World War II with a fixed one-year
    term of 3.95 per cent.

    It then followed this up by offering a $3000 cash
    back incentive for customers, who took out a new home loan and committed to
    keeping their mortgage with ANZ for three years.

    Westpac also announced it will match ANZ’s offer of
    a one-year fixed rate at 3.95 per cent, beginning tomorrow.

    Smaller banks had earlier tempted customers with
    rates under 4 per cent during the past month but major lenders have not dropped
    so low since the 1940s. The highest rate on record was a staggering 19.72 per
    cent in 1988.

    This means banks are trying to stimulate activity by
    giving up a bit of margin to get a crack at the small volume of lending around.

    The banks’ focus is still on stringent income
    tests, making sure a [borrower’s] income is valid, and they can afford the
    mortgage and serviceability test.

    If someone comes to the end of a fixed term rate
    … they might sit there and go, ‘Oh, maybe we should go across to ANZ or BNZ
    or whatever it is’, indicating the refinance game is up as well.

    Speak to your SHARE Adviser about a repayment plan
    to suit your needs.

    Adapted from NZ