Lenders have been pretty quick to respond to our final Official Cash Rate (OCR) announcement of the year (a 0.50% reduction) handed down by the Reserve Bank (RBNZ) last week, delivering a series of cuts to various interest rate terms.
The best advertised six-month rate we’re seeing at the moment is 5.99%—previously sitting up over 6%—while for the one-year term you’re looking at 5.79%, down from 5.99%.
In the lead up to the OCR announcement, there had been a bit of a question mark over just how much of the reduction would be passed on to bank customers—and that one-year rate in particular is still sitting a little higher than the 5.59% we’d previously been hoping for.
That’s a reflection of the problems many lenders are facing at the moment in terms of slow turnaround times on new loans—with an influx of applications in recent weeks having clogged up their systems.
In that sort of scenario, there’s little point to the banks trying to be competitive on rates, but once that’s resolved itself, we’ll hopefully see those rates come down a bit further.
At the moment, the recommended strategy for borrowers would be to fix for six months, knowing that when that loan matures in mid-2025 you’ll be rolling off onto a much more competitive rate—potentially below five percent.
It’s worth reiterating that if you’ve been sitting around on a floating rate for the last few months, waiting for further rate cuts to eventuate before the end of the year, the recommendation would be to fix before Christmas.
Our next OCR announcement isn’t until 19th February 2025, and you don’t want to be stuck on expensive floating rate for all that time.
Check back in next week for the latest news on New Zealand interest rates.
