Have mortgage rates troughed?
The strength of the New Zealand economy could mean home loan rates have troughed in this cycle, according to economists at ASB.
Thursday, February 11th 2021, 9:17AM
The bank's senior economist Chris Tennent-Brown has published his latest home loan report, which suggests we could be at the low point for mortgage rates in this cycle.
The stronger-than-expected recovery from the Covid crisis and "prospects for more improvements" in 2021, give the forecaster cause to predict that rates will stay around current levels.
Economists increasingly predict the official cash rate will stay at current levels before rising in the next few years.
Tennent-Brown said: "Our forecasts suggest we could be at, or near the low-point for mortgage rates. There’s still room for the influences of low bank funding costs and competition to send some rates a bit lower, but the improving economy and rising long-term interest rates here and abroad is an opposing upward force on the mortgage rate outlook – particularly for the longer terms."
In the expectation that rates will rise slowly in the years ahead, he believes borrowers should fix and roll fixed term mortgages over the next five years.
He warned home owners to plan for higher rates, though they may still be years away.
"Borrowers are prudent to plan to deal with higher interest rate costs over the long run, rather than budget on rates remaining this low indefinitely. And for those who want interest rate certainty now, the cost of fixing for longer terms, at below 3%, is very low compared to the past."
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