In Market Focus, ANZ says with the spread between the floating and two-year fixed rate narrowing to as low as 51 basis points for one lender, it is becoming more attractive borrowers to start fixing mortgage rates.
"This will add an additional layer of complication for the Reserve Bank, whose central scenario of normalizing policy in 25 basis point increments was partially contingent on the yield curve working in its favour."
ANZ expects to see more people opt to fix and for the proportion of floating to decline slightly.
BNZ economist Tony Alexander says in the Weekly Overview that the Reserve Bank is expected to raise rates further in the future but the probability of a pause around the end of the year is very high.
"This means floating rate borrowers will still have time to enjoy those low rates before switching to fixed - unless the world outlook improves and those fixed rates jump up, which does not seem on the cards in the very near future."
Westpac Weekly Commentary says borrowers will find the two to three year mortgage rates attractive if they believe the economy is simply wobbling on the path to recovery and therefore the Reserve Bank will continue to normalise the OCR in coming years.
On the other hand, Westpac says those borrowers who believe that markets are presaging a return to recession will be more attracted to floating rates.
ASB Business Weekly believes the Reserve Bank will pause later this year and it now expects the OCR to reach 4.5% next year instead of its earlier prediction of 5%.
J P Morgan Weekly Prospects expects two further rate hikes this year given that the cash rate is still at a highly stimulatory level, however says the transition to the new growth model is far from assured.
BNZ Markets Outlook says the market is now only pricing a 44% chance of a 25 basis point hike in the OCR for the September meeting.
