Mortgage rates heading down

  • 07/09/2015
(Simon Wong/3 News)
(Simon Wong/3 News)

The Reserve Bank will almost certainly cut the official cash rate this week and mortgage rates not seen since the 1960s will be more prevalent as a result.

On Friday BNZ launched a one-year fixed home loan rate of 4.35 percent under its classic brand, which requires borrowers to have 20 percent equity and to bank with BNZ.

It's the lowest mortgage rate since the 1960s, according to interest.co.nz.

Other banks will be reviewing their rates this week as the Reserve Bank is expected to cut the official cash rate by 25 basis points to 2.75 percent on Thursday.

Westpac economists say forecasts in the central bank's monetary policy statement will show 90-day rates falling to 2.6 percent or 2.7 percent, implying a 2.5 percent low-point for the OCR.

But they argue the OCR should be cut to a new all-time low of 2 percent by January.

"New Zealand is entering a significant economic slowdown at a time when core inflation is already well below the RBNZ's target, meaning monetary policy has a great deal of work to do."

ANZ economists note weak dairy prices, a tenuous world economy, a flattening Auckland property market and plateauing Christchurch rebuild as economic challenges and say commentators have mostly turned negative.

But they also say it's a question of balance and there are positives - including lower interest rates and a lower currency.

On balance ANZ says the odds of a recession are low but it may be a bumpy ride.

NZN