Mortgages
2 min read
Last week, the Reserve Bank increased the OCR to 2.75%.
So you might be expecting mortgage rates to have jumped too. But they haven’t really moved at all.
Since last month's OCR increase, the lowest 1-year rate in the market has risen by just 0.04%. The 3-year rates and beyond haven’t moved at all.
But why haven’t the interest rates moved … when the Reserve Bank just upped the OCR? There are two main reasons:
If the OCR goes up by 0.25% … it doesn’t automatically mean that mortgage interest rate go up 0.25% too.
Banks are constantly looking ahead at where they think interest rates will be in the future.
And they saw the OCR increase coming in advance. So, much of the increase had already been priced into fixed rates.
That's why we haven't seen a huge jump in mortgage rates.
The floating rate is the exception. They are more closely tied to the OCR. So they jumped straight away.
A lot of investors don’t realise that although the bank advertises one interest rate … they often secretly discount them behind the scenes.
You’ll often get these discounts when you fix your rate in your bank app, or through a mortgage adviser.
And a few months ago, many banks put their interest rates up, and then started discounting them behind the scenes.
That means they can change their pricing every day, without having to change the number on their website and alerting the whole market.
Right now, we’re still seeing quite a lot of discounting from the banks:
So, rather than seeing advertised rates suddenly shoot up in the wake of the OCR announcement … we could see some of that discounting pulled back.
ANZ's economists don’t expect interest rates to shoot up.
Their latest interest rate forecast has the 1-year mortgage rate hitting 5.1% in December, then staying there through to March 2028.
That's not dramatically different from where the 1-year rate is today.
But the really interesting forecast is for the 2-year rate. It's currently 5.5%. ANZ expects that to fall to 5.2% by March next year.
At the moment, there's roughly a 0.5% gap between the 1-year and 2-year rates.
If ANZ's forecast plays out, that gap could narrow to just 0.1%.
Not sure what to do with your mortgage, or got a scenario you want to run past me?
Hit reply, and let me know.
I’ll come straight back to you.
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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