Mortgage rates reach lowest level

Press, 13 April 1989, Page 3

Mortgage rates reach lowest level

By

PATTRICK SMELLIE

in Wellington

Average home mortgage interest rates fell last month to their lowest levels since the early 1980 s, outside the period of interest rate regulation in 1983 and 1984. New figures from the Reserve Bank show that the average interest rate on first mortgages taken out in March was 15.4 per cent, against a high-point for the 1980 s of 20.5 per cent, in June, 1987. The figures do not include concessional interest rates from Government lending institutions, such as the Housing Corporation. While directly comparable figures are available before January, 1987, similar Reserve Bank tables suggest the last time average new mortgage rates came to March, 1989, levels was in October, 1984. At that time, they averaged 15.01 per cent, and were rising after the removal of interest rate controls imposed by the last National Government. These limited interest rates on first

and second mortgages to 11 and 14 per cent respectively. The trend away from multiple mortgages since financial deregulation suggests homeowners may be getting even greater benefits than is suggested by the bald figures, since most now borrow under one mortgage and avoid the higher rates charged for second mortgages. Excluding the period of interest rate regulations, mortgage interest rates have not attained similar levels since 1981. In the year to March, 1981, average mortgage interest rates were 14.3 per cent. They rose to more than 17 per cent in 1983' in response mainly to rising inflation, and fell only when the National Government imposed its interest rate restrictions. They went as low as 12.76 per cent on average under those regulations in July, 1984 — the month of the General Election — and rose steadily after that. By March last year, they were averaging 17.9 per cent, against 15.4 per cent last month.