Low rates for a very long time: Kiwibank

Mortgage Rates

In their latest report on the housing market, the state-backed bank's economists say they are "increasingly convinced in the need for the RBNZ to continue below 1% to 0.75%", as the central bank shifts to an easing bias amid slowing growth.

The economists, led by Jarrod Kerr, (pictured), say wholesale rates already factor in a 1% rate, with the OCR currently at 1.25%. The lender believes current mortgage rates largely reflect the pricing.

While the lower-for-longer environment looks increasingly certain, it could be tempered by the RBNZ's new capital rules, the economists say.

"The pricing of lending rates will be impacted by banks starting to accumulate more (expensive) capital into 2020," the lender said.

The economists believe banks will lower deposit rates and raise mortgage rates to adjust to the new capital adequacy requirements.

"Banks could lower deposit rates, and keep lending rates relatively unchanged. Or, banks could keep deposit rates relatively unchanged, and lump the full margin on higher lending rates. We’re likely to get a combination of both," the bank said.

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