Police News June 09.indd - New Zealand Police Association

New Zealand Police AssociationHome buying hints fromThe National BankHome Loans – your questions answeredOver the last few months we’ve seen some big changes in home loaninterest rates. In this article you’ll fi nd answers to some of the commonquestions about home loans in the current environment.Why are longer term fixedrates going up when shortterm rates are going down orstaying the same?Short-term rates are infl uenced by theOffi cial Cash Rate (OCR) and may fallin line with falls in the OCR. However,longer term fi xed rates are moreaffected by other factors such as trendsin overseas fi nancial markets. That’sbecause, to provide longer term fi xedrate loans for their customers, banksand other fi nancial institutions have toborrow money from overseas moneymarkets. At the moment that money isharder and more expensive to get, fora number of reasons:• The global economic turmoil hascreated a lot of uncertainty. Asa result, overseas lenders aredemanding higher margins tocompensate them for the increaseduncertainty involved in longer termloans;• Lenders are ‘pricing in’ theexpectation that interest rates willrise over the long term, partly dueto infl ation as a result of the moneygovernments are pumping into theireconomies to try and stimulateeconomic activity; and• Demand for long-term lending hasbeen strong, and the increasedcompetition for funds also drives upinterest rates.All these factors mean banks and otherfi nancial institutions have to pay moreto obtain long-term funding for theircustomers. The recent rises in longtermfi xed interest rates for home loansare a refl ection of those increasedcosts.Should I fix my home loanrate or opt for a floating rateat the moment?No one can accurately predict whatinterest rates will do in the future – sorather than trying to guess which wayrates will go, focus on your situationand what’s important to you.If you want to be able to repaylump sums so you can pay off yourmortgage faster, a floating ratemight suit you as it gives maximumfl exibility. The tradeoff is that floatingrates can change at any time, so youneed to be able to manage if rates riseand your repayments increase in thefuture. If it’s more important to knowexactly what your payments will be soyou can budget, a fixed rate may beright for you. The tradeoff is that theyoffer less fl exibility to make lump sumrepayments and if you want to breakyour loan during your fi xed rate term,you may incur a charge (see belowfor more information). If you wantto be able to use your home loan tofi nance other things like a car, boator renovations, a flexible home loanmay be a better option. We can giveyou more information, help you assessyour needs and help you decide what’sbest for you. Just call us on0800 800 808 or come into anyNational Bank branch.What happens if I break myfixed interest home loan?If you’re thinking about breakingyour existing fi xed rate loan to takeadvantage of the current interestrates, you’ll need to balance thelower interest rate against the EarlyRepayment Recovery charge that willgenerally apply. For details about TheNational Bank’s Early RepaymentRecovery, when it applies and howmuch it is likely to be, visit ourHome Buyers Centre(www.homebuyerscentre.co.nz), andclick the ‘Managing Your Loan’ tab.If you’d like to fi nd out more informationabout Police Home Loans fromThe National Bank, call 0800 800 808,or contact your local branch orMobile Mortgage Manager.06-2009OUR LENDING CRITERIA, TERMS, CONDITIONS AND FEES APPLY. WHERE BORROWING OVER 80% OF A PROPERTY’S VALUEIS APPROVED, A LOW EQUITY PREMIUM ON A GRADUATED SCALE WILL APPLY AND A REGISTERED VALUER’S REPORT IS RE-QUIRED. THIS MATERIAL IS PROVIDED AS A COMPLIMENTARY SERVICE OF THE NATIONAL BANK. IT IS PREPARED BASED ONINFORMATION AND SOURCES THE BANK BELIEVES TO BE RELIABLE. ITS CONTENT IS FOR INFORMATION ONLY, IS SUBJECTTO CHANGE AND IS NOT A SUBSTITUTE FOR COMMERCIAL JUDGEMENT OR PROFESSIONAL ADVICE, WHICH SHOULD BESOUGHT PRIOR TO ENTERING INTO ANY TRANSACTIONS. TO THE EXTENT PERMITTED BY LAW, THE NATIONAL BANK DIS-CLAIMS LIABILITY OR RESPONSIBILITY TO ANY PERSON FOR ANY DIRECT OR INDIRECT LOSS OR DAMAGE THAT MAY RESULTFROM ANY ACT OR OMISSION BY ANY PERSON IN RELATION TO THE MATERIAL.June 2009137