ASB says it's a 'higher road ahead' for mortgage rates

by Krizzel Canlas25 May 2018

Floating and shorter-term fixed mortgage rates should remain relatively stable into 2019, says ASB Bank.

In its latest Home Loan Rate report, ASB said with Official Cash Rate (OCR) likely to remain on hold until August 2019, slightly lower rates will also remain.

ASB economist Kim Mundy said the bank expects mild monetary tightening by the Reserve Bank of New Zealand (RBNZ) that suggests shorter-term fixed rates should continue to offer good value.

“Our bias also remains for longer-term mortgage rates to drift up, given gradual increases to the OCR and the drift higher in global longer-term interest rates,” Mundy said. “US longer-term interest rates have risen sharply over recent months, increasing the chance we see these pressures flow through into NZ mortgage rates.

“Higher offshore rates tend to influence domestic tenors longer than the 2-year fixed rate,” she added.

ASB also expects mortgage interest rates to move up sooner (and by more) than what we expect. 

“The catalyst could be the OCR moving up earlier and faster than what our forecasts assume, or the lift in global rates feeding through into higher local longer-term yields sooner than expected,” Mundy added. “Borrowers should think about their appetite for risk and ability to absorb higher interest rate costs should this occur.”

 

Related stories:
OCR fixed at 1.75% and will remain so for some time, RBNZ
RBNZ updates market on proposed enhanced mortgage bond standard 

 

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