% of New Zealand mortgages that were fixed and floating since 2004

Despite the best efforts of the libertarian paternalists to sell the other people are stupid fallacy, ordinary New Zealanders are quite nimble at moving between fixed and floating rates depending upon their forecasts of the future of interest rates. Price controls on floating rate mortgages, as suggested by the New Zealand Labour Party, would make this more difficult, not easier.

image

Source: S8 Banks: Mortgage lending ($m) – Reserve Bank of New Zealand.

Percentage of fixed and floating mortgages in New Zealand

I did not know so many people were on a fixed rate mortgage.  Labour is risking its economic credibility on regulating the rates for a minority of mortgages.

image

Source: S8 Banks: Mortgage lending ($m) – Reserve Bank of New Zealand.

Capped mortgages cannot be linked to the current official cash rate of the Reserve Bank of New Zealand because they are based on expected future interest rates over an up to 5 year span, not current interest rates.

An important motivation for going onto a floating rate is you can repay faster. Fixed rate mortgages have penalties for early repayment.

Source: Price Controls: Price Floors and Ceilings, Illustrated.

In consequence, price controls linking floating rate mortgages to the official cash rate of the Reserve Bank would benefit better off mortgagees expecting to repay quickly. A typical policy of the modern Labour Party.

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