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Why mortgage rates are likely to fall even lower

Home loan rates are already at record lows, but economists at ASB predict interest rates will plummet even further in the coming months.

Thursday, August 13th 2020, 4:43PM

The economists say the Reserve Bank could push down borrowing costs for retail banks by introducing a direct lending facility, as well as making further cuts to the official cash rate.

A central bank move to introduce a lending facility would mean "term deposits, wholesale interest rates and fixed-term mortgage interest rates would all be expected to decline", the economists said. 

The big four lender cautioned that any rate cuts from here would be "minor", compared with what we have seen over the past 18 months.

"But we don’t think that mortgages would fall by much compared to how far they have fallen already. Competition between lenders is always in the mix putting pressure on mortgage rates, so tweaks lower on particular terms are always on the cards. In saying all this, we stress that we think the large falls in mortgage rates have already occurred over the past couple of years."

What are the best options for fixed rate borrowers? 

ASB forecasts suggest fixing and then rolling on shorter-term one and two year terms in the current environment, a move "likely to be the cheapest option over a five year time horizon".

"At this juncture our forecasts suggest some terms could dip a little more (if term deposits decline, and the RBNZ cuts the OCR again, or lowers the cost of bank funding via other initiatives), but the big moves have already occurred. Rates are expected to move higher eventually, but not over the next year or two."

Tags: ASB fixed rate mortgages interest rates Lending mortgages Reserve Bank

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 3.85 3.95 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 ▼2.45 2.65 2.79
Kainga Ora 4.43 2.93 3.07 3.24
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 3.05 3.19 3.25
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.55 2.69 2.75
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.15 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.00 3.13 3.02

Last updated: 21 September 2020 10:48am

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