It's been two days since the emergency OCR cut, which saw our already low rate go from 1% to 0.25%. The 0.75% cut was a more drastic measure than most economists were predicting. So, how does this translate into New Zealand mortgage rates?
After the cut, Westpac was the very first bank to drop their floating rate by 0.75%, taking their standard floating rate down to 4.59%. Other banks have quickly followed suit with Kiwibank and The Co-Operative banks’ floating rates sitting at the lowest of 4.40%.
Fixed rates had started going down prior to the OCR cut, and most banks have merely continued this trend. Two-year fixed interest rates are now sitting at 3.39%, which is the same as most one-year fixed interest rates.
It's early days and there is still more margin for banks to cut interest rates further. We won't be surprised if the one-year fixed term drops below 3% later in the week.
What does this mean for homeowners?
With an extremely low Official Cash Rate and mortgage rates, for those who are locked into an existing mortgage, the temptation to consider breaking and refixing will be high. Wholesale swap rates will be low, which means that the break fee on your fixed mortgage is likely to be high.
If you're considering breaking your loan, then switching banks could be the most logical option. Speak to your bank and find out what the break fee will be, then speak to a mortgage adviser on what options may then be available for you.