It’s been a slow few weeks for interest rate news, but now that our next Official Cash Rate (OCR) announcement is just around the corner, we’re starting to see a bit of movement.
Wholesale rates have fallen slightly over the last week or so, reflecting the market expectation that we’re in for a further 0.25% cut on 20th August, taking us from 3.25% to 3.00%.
Of greater interest, the Reserve Bank will also be delivering its updated interest rate forecast looking out to the months ahead.
To date, it’s held pretty firm in its ‘neutral’ OCR estimate of 3%—but in light of growing unemployment, weak consumer confidence, and the fact that our recovery so far has been muted at best, there’s a possibility that it could signal further reductions to come later in the year.
All will be revealed later this month.
The best mortgage rate out there right now is the one-year term, sitting between 4.80% and 4.85%. That said, with both the two- and three-year terms hovering around 4.95%, some of those longer-term rates are looking really attractive as well.
The recommended strategy for borrowers hasn’t changed, and splitting your mortgage across a mix of shorter and longer-terms is still a good bet.
Having part of your mortgage fixed shorter-term means you should be in a position to roll onto a slightly lower rate in a year’s time. If the RBNZ is factoring in further cuts—taking us below 3.00%—the one-year rate could get down as low as 4.50%.
Meanwhile, having the remainder of your mortgage fixed for longer gives you the benefit of rate certainty over that portion, and at a good rate.
Check in again next week for the latest news and updates on NZ interest rates.
