The latest on mortgage rates | July 2017

Percentage symbol made of clouds

We’re still seeing mortgage rates in the mid-fours for owner-occupied borrowers. Tight credit conditions mean it’s not competitive for those with less than 20% equity, property investors, or overseas borrowers. Banks are wanting to increase margins, with the focus on those parts of the market they don’t want to grow or where lending restrictions are biting.

Competition from smaller banks is keeping rates down for owner-occupied lending. TSB came out with a 4.49% 2-year special. For property investors, rates are tending more to 4.80% and higher.

The market view of increasing interest rates was predicated on US rate increases. In recent days, the Federal Reserve has admitted to lower than forecast inflation and not knowing where inflation is going. They’ve been expecting low unemployment (resource utilisation) to kick it off but that never seems to arrive.

I will keep coming back to my long-term underlying theme of technology led deflation as well as higher levels of debt that is suffocating growth. I can’t see inflation any time soon and as a result low rates will persist for a very long time.

I’d still be locking in as long as I can with a rate below 5.00%. Rates won’t go lower and the risk is that rates will increase, but only a little bit. I wouldn’t be surprised to see rates in the mid-fives. That’s where banks want it. For now, competition from the minnows is keeping rates lower, but for how long?