Banks offer stimulus when the market cools

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Desperate banks are offering a range of deals to attract customers amid a perfect storm hit the housing and credit markets.

BNZ and KiwiBank both offer 1% cashback for customers (with strings attached) — in some cases that could mean as much as $20,000 — when they take out home loans.

ANZ has introduced a special 1% interest rate for current borrowers who want to make their homes energy efficient. This can mean installing solar panels, heating and insulation or double glazing. The loan of up to $80,000 could also be used to purchase electric or hybrid vehicles.

Falling home prices, tough credit conditions, buyer hesitancy and rising interest rates are making potential borrowers nervous, all of which are causing mortgage applications to fall.

ANZ’s Ben Kelleher says customers have been asking about incentives like the energy efficiency loan.

“The market has slowed down, you see it in home sales too, the fear of missing out has gone and the fear of overpaying has come, it will be interesting to see what happens in the summer months,” said he told 1News.

Sense Partners economist Hannah Ouellet says the housing market has cooled off significantly, meaning it’s also a buyer’s market when it comes to competition among banks. “Banks also compete for customers”.

READ MORE: Big banks cut two-year mortgage rate

However, she believes that many of the offers on offer are aimed at those with higher incomes and larger deposits.

“Reading between the lines of the terms makes it clearer that the larger the loan, the larger the repayment.”

And it’s not just the banks trying to sweeten the deal. Signature Homes is offering fixed-rate construction for their new homes at a time when resource shortages and labor shortages are skyrocketing.

Signature Homes’ Gavin Hunt says it’s very difficult for people to get financing from the banks if they don’t know the ultimate cost. And “Customers hear about material shortages and supply chain difficulties, and that makes people nervous.”

As always, Ouellet says potential borrowers should shop around.

“What buyers should be aware of is the trade-off between the interest rate they’re being offered and the deal itself, as there are other challenger banks that offer lower interest rates but don’t have those cashback offers.”

The Reserve Bank’s next official cash rate decision is on Wednesday. It is widely expected that the interest rate will increase again by 25 or 50 basis points from the current 2%.

While some banks have already reflected this in their interest rates, the real estate market, in a state of flux, expects competition and volatility to continue.

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