We’re counting down the days to our first Official Cash Rate (OCR) announcement of the year, scheduled for 19 February.
The Reserve Bank (RBNZ) is expected to stay the course on this one, delivering the 0.50% cut it said it would back in November to take the OCR from 4.25% to 3.75%.
Of most interest will be the RBNZ’s updated OCR forecast, looking ahead to the rest of the year—giving us insight into just how quickly we can expect mortgage rates to drop below 5%.
Assuming this next announcement goes as expected, that will mean there’s just 0.75% more to go to get us to the RBNZ’s ‘neutral’ OCR of around 3%. That should (in our view) happen pretty quickly, over the first half of the year.
At the moment, the best one-year rate we’re seeing out there is 5.55%, while the best two-year rate is 5.29%.
That’s consistent with where wholesale rates are sitting at the moment, which means swap rates will need to come down a bit before we’re going to see any further downward movement in those one- and two-year rates.
The catalyst for that should come with this next OCR announcement, it’ll just take a bit of time for the change to trickle through to mortgage rates.
For anyone coming off a fixed rate term in the next few weeks, the advice would be to let your loan roll onto a floating rate (which it’ll do automatically if you don’t refix) and just hang out there for a few weeks.
By early March, those rate falls should have eventuated, and we should be seeing rates out there a bit closer to 5%.
At that point, with further rate falls expected over the next few months, the recommendation would be to fix short-term, for between six months and a year.
