Fixing short terms the cheapest option for borrowers
ASB's team of economists expect the official cash rate to rise from May 2022. Yet they don’t believe the OCR will move up “significantly”, and forecast a peak of 1.25% in late 2023 or early 2024.
In the bank’s latest Home Loan Rate Report, ASB said downward pressure on short-term rates could continue, with the RBNZ Funding for Lending Programme providing cheap financing opportunities for the banks. ASB recently launched a 1.79% floating rate “back my build” mortgage for new build homes.
While rates remain low, global economic factors could push interest rates higher. ASB said an improving economic picture here and abroad remained an upward force on the mortgage rate outlook, “particularly for the longer terms”.
With the prospect of rising long-term rates, and potential falls on shorter terms, the bank recommends fixing shorter terms and rolling those over, rather than locking in longer-term rates.
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