Mortgage rates may drop below 4 percent

(Photo: 3 News)
(Photo: 3 News)

A broker is tipping mortgage rates could drop below 4 percent after the Reserve Bank cut the official cash rate (OCR) today and indicated more cuts are likely.

It's good news for mortgage holders, not so good for savers.

Kyle Donegan took out a mortgage on his first home a year ago, and is delighted to hear that interest rates are on their way down.

"We do have one of our fixed terms about to come off to renegotiate, so it's perfect timing on that front."

His question now - is it worth breaking the longer fixed components of his mortgage to get a better rate? Mortgage broker David Windler says yes.

"The rates that a client might have and rates of the day mean the gap keeps getting wider, and the break costs will keep going up."

Mr Windler says if buyers can meet deposit requirements, their cashflow will be very good.

"If you look at the fixed rates at the moment, everything's got a four in front of it. If we've got two or three more drops to come, is there the potential for a 3.99 [percent] rate?"

ANZ chief economist Cameron Bagrie says the 0.25 percent cut in the OCR to 3 percent was expected, and there are always winners and losers.

"Good for the consumer, good for the property market, provided you get the New Zealand dollar down with it. The New Zealand dollar popped a little bit today, which is good for the exporters. The flipside is not too great for savers and not too great for importers."

Retiree John Merrick agrees.

"It affects me mainly because of our investments; we rely on some of the interest from our investments and that."

Most banks' floating rates have dropped already, but Mr Windler says fixed rates usually take 48 hours or so to flow through, so if he was looking at borrowing now he'd sit tight for a day or two to see what happens.

3 News