They issued advice on how borrowers could secure the “best” deal for their mortgage
It seems mortgage rates have hit their lows in late 2019 – and ASB economists expect the prices to remain low throughout the year.
ASB’s Home Loan Rate Report revealed that mortgage interest rates dropped between 0.6% and 1.2% over the past 18 months – which have been driven by the Reserve Bank of New Zealand (RBNZ)’s official cash rate (OCR) setting, developments in domestic and global fixed-interest markets, and other bank funding costs.
As a result, the ASB economists predicted that mortgage rates would stay low throughout the year – with the fixed-term mortgage interest rates being expected to remain at historically low levels over the year ahead.
“[However], the large falls have already occurred, and we think the low point in longer-term mortgage interest rates is now,” the ASB economists said in the report.
“Unless the outlook deteriorates, and RBNZ cuts the OCR, we don’t expect to see significant drops in longer-term mortgage interest rates. We expect increases to the OCR in a few years and the associated higher wholesale interest rates to start to push NZ mortgage interest rates higher over the coming years.”
Read more: ASB economists expect OCR to remain unchanged until 2022
The ASB economists said it would be wise for borrowers to budget on mortgage interest rates as they gradually rise in the future, especially if they would carry their debts for more years.
“However, with all this talk about higher interest rates, borrowers will be pleased to know we still expect mortgage interest rates to eventually settle at levels that remain below the long-run averages of the past 20 years,” they clarified.
“Everyone wants to secure the ‘best’ deal for their mortgage ... Personal preferences for certainty and flexibility are vital considerations when choosing a mortgage rate, rather than simply opting for the lowest rate,” they advised.
They also noted that borrowers could fix their mortgages to obtain a significantly lower rate or split their mortgage into different terms to suit their preferences better.
“Overall, it is important for borrowers to weigh up their priorities and make the mortgage choice that looks best aligned with their needs,” the ASB economists concluded.
