For this week’s update, let’s take a look at what’s predicted to happen with interest rates over the coming months, and what that could mean for borrowers.
The Reserve Bank has laid out its plans for our next two Official Cash Rate (OCR) announcements, coming up on 9th April and 28th May, with each expected to bring a 0.25% reduction. Assuming things play out as anticipated, that will take the OCR from its current 3.75% down to 3.25%.
From there, we’re expecting to see one further 0.25% cut—likely in July—to get us back to a ‘neutral’ OCR of 3% by mid-2025.
What will that mean for interest rates?
Longer-term rates aren’t expected to fall much further from where they are now, with those forecasted OCR cuts already largely priced in.
So, if you’re keen to fix long-term, there’s not a lot to stop you from locking in now—especially with the 4.99% two-year fixed rate currently on offer across most lenders, which is looking really attractive.
Shorter-term rates, however—which are sitting a little higher—will continue to drop with the OCR.
If you’re wanting to hold out for a better deal, the recommendation would be to just sit on a floating rate for now, until after our next OCR announcement. By that point, we should hopefully see some of those shorter-term rates getting down a bit closer to 5%.
Talking broader mortgage strategy for a moment…
As we edge closer to the bottom of the interest rate cycle, it’s a good idea to think about splitting your loan across different fixed rate terms if you can.
The reason for that is that interest rates aren’t perfectly predictable—you never know exactly when they’re going to bottom out, or when they might start to climb again—and so locking in across a variety of terms can help to give you a degree of both flexibility and certainty, no matter where rates head next.
Check in again next week for the latest news on interest rates.
