OneRoof adviser on limited impact of OCR cut on mortgage rates
As the Reserve Bank (RBNZ) prepares for its first meeting in three months, expectations are high for a potential cut in the OCR from 4.25% to 3.75%.
However, a mortgage adviser cautioned that this anticipated cut may not translate into substantial reductions in mortgage rates.
Banks’ anticipatory rate adjustments
Tella Home Loans financial adviser Jose George (pictured) said banks have preemptively adjusted their mortgage rates in recent weeks, indicating limited room for further reductions.
“We are not going to see too much movement from the banks,” George told OneRoof, suggesting that any OCR cut might impact mortgage fixing terms more significantly than the rates themselves.
For example, Westpac has already lowered its three-year rate to 4.99%, while BNZ and ASB have reduced their two-year rates to 5.29%, and the lowest one-year rates hover just under 5.5%.
Strategic mortgage fixing in a changing rate environment
Homeowners have recently favoured fixing their mortgages for no more than a year, but as the OCR potentially nears a forecasted low of 3.25%, George predicts a shift towards longer fixing periods.
He believes that while Westpac’s three-year rate is appealing, most Kiwis might opt for 18-month or two-year terms, which he identifies as the “sweet spot” for most customers in New Zealand.
Market expectations and long-term trends
George anticipates that home loan rates will stabilise between 5% and 6% during this cycle, reflecting traditional market positions.
“After 2020/21, people got used to cheap money. It has taken people a bit of time to come back to the reality that 5% to 6% is usually where the market sat anyway,” he told OneRoof.
Economic outlook and policy implications
The upcoming monetary policy statement, to be released alongside the OCR decision, is highly anticipated for clues on the economic direction and further OCR adjustments.
“That could give you a sense as to whether they want to ride their way to 3.25% by the end of the year, because that impacts a lot of things again, especially on the floating rate,” George told OneRoof.
The consensus among the NZIER shadow board members suggests positioning the OCR between 2.75% and 3.5% over the next year, mirroring broad intent to moderate the pace of future rate cuts.
