Bank fixed term mortgage rates have been tracking downwards in the wake of the Reserve Bank’s Official Cash Rate (OCR) decision a couple of weeks ago—where it delivered a 0.25% cut from 5.5% to 5.25%.
Something for borrowers to be wary of at the moment is the temptation to fix long-term
At the moment, we're seeing longer-term fixed rates often sitting much lower than the shorter-term fixed rates we’re seeing out in market—in some cases, below 6%.
With significant OCR falls expected over the next year or so, fixing long-term would mean you’re not going to be in a position to take advantage of those cuts when do they come through.
Then, once rates do eventually drop below the level you’ve fixed at, borrowers also risk exposing themselves to costly break fees should they want to break their existing loan in order to take advantage of lower rates.
The advice for anyone refixing or settling on a new loan right now—which is what most borrowers are doing at the moment—is to go short-term, fixing for between six months and a year
The best six-month rate we’re seeing out in the market at the moment is 6.65%, while the best one-year rate is around 6.25%.
We’ve got our next OCR review coming up in about six weeks’ time, and we’re expecting to see fixed rates remain relatively stable until then—but competition is certainly heating up amongst the banks.
Check in again next week for our latest update on New Zealand interest rates.
