Despite getting the reduction we’d hoped for last week—one final 0.25% Official Cash Rate (OCR) cut to round out the year—there’s been very little movement on the interest rates front over the last few days.
Floating rates have come down slightly, as you’d expect, but short-term fixed rates have remained largely unchanged. In fact, longer-term fixed rates (four and five years) have actually started to track upwards ever so slightly.
If past experience is anything to go by, it’s a pretty clear indicator that we’re at the bottom of the interest rate cycle.
What does this latest news (or lack of) mean for borrowers?
To anyone who’s been holding out on a floating rate, hoping that fixed term rates might come down just that little bit further: now’s the time to lock in.
The strategy for most borrowers over the last little while (as rates have tracked downwards) has been to fix short-term—chasing the promise of cheaper rates to come.
But now, with it looking highly likely that we’re at the bottom, it's worth considering some of those medium to longer-term options, locking in interest rate certainty while also capitalising on being in a low-rate environment.
The best advertised two-year rate on offer currently is 4.45%, while for the three-year you’re looking at 4.75%. We’ve still got a couple of the main banks offering four- and five-year rates at 4.99%, which is a good deal.
For anyone still wanting or needing to fix short-term, the best one-year rate we’re seeing is with TSB at 4.39%, while all the major banks are offering 4.49%.
What's right for each borrower will vary depending on their personal situation, so it’s always a good idea to chat with a mortgage adviser to get tailored advice.
Check in again next week for the latest news and updates on New Zealand interest rates.
