Economists expect lenders to consider "balance sheet risk management" over the coming months
ASB economists have estimated that fixed rate mortgages may have already hit their lowest point in this cycle.
As borrowers refix their mortgages over the coming months, lenders are expected to consider “balance sheet risk management” to put “upward pressure” on wholesale swap rates – although they have already risen since the Reserve Bank of New Zealand (RBNZ)’s decision to keep the official cash rate (OCR) at its current level.
“The mortgage rate cuts made in October coincided with a bout of global risk aversion that dragged NZ interest rates lower as well as the local market pricing in an OCR low of 0.5%,” the economists wrote on ASB’s latest economic weekly report, as reported by Landlords.co.nz.
Read more: ANZ sets new lower one-year mortgage rate
Nick Tuffley, chief economist at ASB, said they predicted that the OCR will still drop to 0.5% soon but mortgage rates might not fall much further.
"With the benefit of hindsight we might look back and note that the last few months have provided a perfect storm to the benefit of borrowers. Even if the RBNZ does eventually cut the OCR to 0.5%, as we still assume, term interest rates may not drop back to the levels of last month. At present, our 2-year special mortgage rate of 3.45% looks to be an attractive option for borrowers,” he said.
