We haven’t seen much movement in mortgage rates over the last week or so, with the impact of August’s Official Cash Rate (OCR) cut having already largely flowed through to the market.
The best one year rate we’re seeing out there at the moment is 6.35%—while for six-months, you’re looking at 6.85%.
The recommendation for anyone looking to refix at the moment would be to fix for six months—despite those shorter-term rates remaining stubbornly high—or to think about keeping their loan on a floating rate instead.
The reason for that is the fact that the market is anticipating two further OCR decreases before the end of the year, so floating or fixing short-term is going to give you the freedom to ride rates down as those decreases come through.
We’ve got our next OCR announcement coming up on the 9th October, and the expectation with that is that the Reserve Bank will deliver another 0.25% cut, dropping the OCR to 5%.
After that, our final OCR announcement of the year is due to happen on 27th November. Assuming that brings another 0.25% cut (which is what the market’s expecting) that will give us an OCR of 4.75% going into Christmas.
All things going to plan, that should mean shorter-term interest rates fall below 6% before the end of the year.
As we've touched on in previous updates, we’re already seeing longer-term rates sitting well below that—with some lenders offering two-year rates as low as 5.79%.
While that might be tempting, with rates expected to fall steadily over the next six to 12 months, the advice would be to lock in shorter-term—as that will allow you to take advantage of further rate falls sooner.
As always, check in again next week for our latest update on what's happening in the world of interest rates.
