Once again, there’s not a whole lot to report on the mortgage rates front from over the last week or so. Interest rates are pretty steady right now.
As we’ve mentioned in previous updates, things seem to be largely on hold as the market waits for our next Official Cash Rate (OCR) on 9th October, which is now less than three weeks away.
The widespread expectation is that we should see another 0.25% drop in the OCR in October
And if that is indeed the outcome, you can expect to see short-term fixed mortgage rates follow suit relatively quickly. It could mean that, by mid-October, we’re seeing one-year rates out in the market below 6%—likely somewhere between 5.89% and 5.95%.
The recommendation for anyone coming up to a fixed-rate rollover at the moment, or buying a new house in the next few weeks, would be to consider rolling onto or settling on a floating rate for now.
Then, once that next OCR announcement has rolled around, and further rate drops have come through—specifically that we’ve got one-year rates below 6%—you could look at fixing for a year.
While six-month rates have been a good option for borrowers up until relatively recently—just to tide people over until rates started to come down again—they’re remaining stubbornly high at the moment. And especially once one-year rates start to dip below 6%, they’ll be looking quite expensive.
With longer-term fixed rates sitting in the mid-5% range, they might seem tempting for borrowers at the moment.
But with plenty of further rate reductions in the forecast for next year, it pays to remember that locking in long-term is going to stop you from taking advantage of further rate falls once they do start to come through.
Check in again next week for our latest update on what's happening with interest rates in New Zealand.
