Wholesale rates are still on the same downward track they’ve been on for about a month or so, having fallen even further in the last few days
There are two key things that are really driving that trend at the moment.
Initial falls were triggered by all the really weak economic data we’ve seen come out over the last little while—which we’re likely to get more of over the next month or two—that all points to a pretty negative outlook for New Zealand GDP.
And in recent days, those concerns have been amplified by some pretty weak economic signals now coming out of the US, suggesting they may be on track for a recession, which would have a flow-on effect for our economy as well.
For borrowers, the good news is that falling wholesale rates should soon trickle through to mortgage rates
The trend we’re currently seeing with wholesale rates means there’s mounting pressure on the Reserve Bank to drop the Official Cash Rate (OCR), sooner rather than later.
We’ve got our next OCR announcement coming up in just a few days’ time, on 14th August—and it could happen as early as that. But if not then, it will almost certainly be before the end of the year, either in October or November.
So, what does that mean for anyone looking to fix their mortgage right now?
The recommendation for anyone looking to fix their mortgage at the moment would be: don’t be in too much of a hurry.
And that goes both for anyone settling on a new property over the next week or so, and those about to roll off an old fixed term rate.
With lower interest rates potentially just around the corner, you’d be well advised to transition to a floating rate at least until after that August OCR announcement. If nothing else, we should at least have a clearer idea from then of when interest rates will start to come down again.
The expectation is that when rates do start to fall, they’ll fall fast, which means we could see mortgage rates drop by as much as 1% by the end of the year. So, by opting to float in the short-term, that’ll mean you can get onto those lower rates as soon as possible one they do start to come through.
Check in again next week for more news on interest rates—including our take on what the OCR outcome on 14th August means for mortgage borrowers.
