Move to short term but higher rates

Across loans for house purchases, top-ups, and bank switches, 36% in December (by value) were fixed for up to one year, but by February, that figure had risen to 56%.

The increasing preference to ‘fix short’ comes at a cost, however, with one-year special rates still about 0.6% higher than three-year rates.

CoreLogic says many borrowers are prepared to pay more now, with the hope of saving money later as mortgage rates fall over the medium term.

So, how much do interest rates need to fall to make this strategy of paying a higher rate to go short worthwhile? BNZ chief economist Mike Jones lays out an example.