Mortgages
3 min read
The Reserve Bank just increased the OCR by 0.25%. It's now sitting at 2.5%.
To be honest, it won't change interest rates much.
While the increase was a surprise to some people, it hasn't spooked the markets.
So far, the banks' borrowing costs (the swap rates) are up just 0.03% since the start of the day.
So what is happening to your mortgage interest rate?
The longer-term rates have started dropping again.
The average 2-year negotiated rate is down 0.12%. (Back under 5%!)
And the 5-year negotiated rate has fallen from 5.78% to 5.55%.
Let's put that into context.
Say you have a $500,000 interest-only mortgage and you plan to fix for 5 years.
That drop from 5.78% to 5.55% saves you $5,750 over the 5-year term.
Not bad for a month's wait.
What about the short-term rates? They barely budged.
The action this month is all at the long end.
A lot of it comes down to oil flowing back through the Strait of Hormuz.
The price of petrol and oil has come down. So the markets are less worried about inflation.
You can see it in the swap rates. Think of this as what it costs the bank to borrow money and lend it out to you and me.
The 5-year swap rate peaked in March 2026 at about 4.2%. It's now down to about 3.7%. That's roughly half a percentage point off.
But the banks aren’t cutting the advertised rates you see on TV or on billboards much. They're hiding those decreases in the secret bank discounts.
Remember, the bank usually discounts its rate when you take out a mortgage.
So it might advertise 5.19%, or even 5.29%, for the 2-year rate.
But behind the scenes, all the big banks are offering 4.99%.
That's a big gap. And it's hard to see as a borrower. So I like to share what we're negotiating at Opes Mortgages.
Why the bigger discounts? Because there's uncertainty about where interest rates go next.
So the banks' borrowing costs have gone down, but rates are still uncertain.
When that happens, the banks typically leave their advertised billboard rates unchanged. Then they discount behind the scenes.
If you've been looking enviously at the people who locked in a long-term rate, now could be the time to think about locking in yourself.
The time to lock in a long-term rate is when you don't feel like you need it.
When things feel calm, long-term rates go down.
But hardly anyone locks them in. The future feels certain, so why pay for certainty you don't think you need?
Then the markets get choppy. The future stops feeling certain. So interest rates rise.
Now everyone wishes they'd fixed for longer. So they lock in … but at that higher rate.
So most people get it backwards. They fix short when it's calm, then wish they hadn't. They reach for a long-term rate once things turn, and pay more for it.
Right now, things are calmer than they were.
I'm not telling you to lock in for longer. Some of my clients blindly lock in at the one-year rate no matter what.
But I'm trying to show you the mistakes borrowers sometimes make.
So, talk to your mortgage adviser to choose a rate that suits your plans.
And if you're looking for a good mortgage advisor, you might like to consider my team at Opes Mortgages.
Hit reply and tell me your situation. I'll come straight back to you to see if my team can help.
Cheers,
Pete
Mortgage broker for over 10 years, property investor and Managing Director at Opes Mortgages
Peter Norris, a certified mortgage adviser with 10+ years of experience, serves as the Managing Director at Opes Mortgages. Having facilitated over $1.2 billion in lending for 2000+ clients, Peter is a respected authority in property financing. He's a frequent writer for Informed Investor Magazine and Property Investor Magazine, while also being recognized as BNZ Mortgage Adviser of the Year in 2018 and listed among NZ Adviser's top advisers in 2022, showcasing his expertise.
This article is for your general information. It’s not financial advice. See here for details about our Financial Advice Provider Disclosure. So Opes isn’t telling you what to do with your own money.
We’ve made every effort to make sure the information is accurate. But we occasionally get the odd fact wrong. Make sure you do your own research or talk to a financial adviser before making any investment decisions.
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