Wholesale rates have continued to track downwards over the last few days, as expectations grow that we’re in for another 0.25% Official Cash Rate (OCR) reduction on 20 August.
It’ll be the final step to get us back to the Reserve Bank’s current neutral estimate of 3.00%—but the jury’s still out on whether it’ll be the end of interest rate cuts.
Given how slow our economic recovery has been to date, the general view is that there’s scope for the OCR to come down a bit further still, potentially to somewhere between 2.50% and 2.75%. At the lower end of the spectrum, that would see the one-year fixed rate get down to around the 4.50% mark.
We’ll get the RBNZ’s updated interest rate forecast as part of next week’s announcement, which will give us an idea of where it’s head at on that front.
What does that mean for mortgage rates?
So certain is the market of next week’s OCR verdict that the big five banks have all made preemptive moves to drop their shorter-term mortgage rates in recent days.
The best one-year rate on offer right now is 4.79%—which is a fantastic rate—while the best two-year rate is sitting at 4.89%.
For anyone refixing or settling on a new mortgage right now, splitting your loan across a mix of shorter and longer terms is still the recommended course of action. That could look like having part of your loan fixed for a year at 4.79% and the remainder for three years at 4.95%.
Check back in again next week for the latest news on New Zealand interest rates.
