Jenee Tibshraeny: NZ Herald Wellington business editor on the banks cutting down mortgage rates after OCR decision

Banks have begun slashing shorter-term mortgage rates following today's cuts to the OCR, but experts have issued a warning to homeowners.

Reserve Bank policymakers are again warning borrowers not to hold their breaths for substantive cuts to longer-term mortgage rates.

NZ Herald Wellington business editor Jenee Tibshraeny explains the factors behind today's cuts.

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Episode Transcript

Speaker 1 (00:00):
Bryan Bridge your news talk ZB and we will be
speaking to Milford actually in just a few moments to
get a market update right now, though the banks have
followed Adrian Or and they are cutting mortgage interest rates
after the OCR decision this afternoon, am Z it's two
year rate is down below the five percent mark to
four night, I mean barely four nine to nine. But
it is of course bad news for sabers. Term deposit

(00:22):
rates have been cut to Jane Tips Training is The
Herald's Willington business editor. She's with us tonight. Hi Jane,
Hi Ryan. Now, I saw your question and I thought,
great question to the Reserve Bank today at the press
about the longer term rates your two to five years.
What can we expect to see there?

Speaker 2 (00:38):
That's right. Assistant Governor Karen Silk basically tempered people's expectations
around those longer term rates coming down. She made the
point that, yes, the OCI has a more direct impact
on floating rates and on shorter term rates, but when
it comes to those two, three, four, five year mortgage rates,

(00:59):
those are affected by a range of international factors that
are beyond the Reserve banks control. So the thing is
is that at the moment. Some of those factors are
putting quite a bit of upward pressure on interest rates.
So if you are floating or fixing for a short term,
those rates will keep coming down a bit. But if
you're looking to fix longer term, we might not see

(01:22):
mortgage rates come down too much. Now, some of those
factors that are pushing up those rates are the fact
that investors around the world are worried about Donald Trump's
policies being inflationary, so federal reserve interest rates that the
Federal Reserve not cutting rates are as quickly, also worried

(01:43):
about geopolitical risks, and worried about the US, the finances
in the US and the government's fiscal deficit. So those
factors are making it more expensive for banks to borrow,
and that does affect people looking to fix the mortgages
for longer terms.

Speaker 1 (02:00):
We're getting punched in the head twice, isn't it. You know, Well,
finally we get some relief, but oh no, actually we've
got Trumps, So those longer term rates aren't going to
be as attractive as we would have hoped.

Speaker 2 (02:10):
I know, it's it's really it's really one thing after
the next, and yeah, and you know, The Reserve Bank
did share a bit of data on that. They said
that currently the average interest rate that banks receive on
all their mortgages is about six point two percent. By December,
they reckon it'll only get to five point seven percent.
So while, you know, while we'll start to feel those

(02:33):
lower interest rates quite soon, the overall impact is not
going to be big. Like, if the average interest rate
that banks are receiving is only five point seven percent
by December, you know that shows that the rates will
you know, stay stay a wee bit elevated. Five point
seven percent is the level that it was at in
late twenty twenty three.

Speaker 1 (02:53):
Wow, that is a really interesting stat Were you surprised
the rbn Z still very firm on seventy five basis
point cuts this year?

Speaker 2 (03:04):
Yeah, that it was a little bit more dubbish than
it was in November. I think the bank is worried
about the effect that tariffs and some of this sture
of political instability will have on GDP growth. It didn't
interestingly take a view on that the impact tariffs would
have on inflation. That was something I was looking out for,

(03:25):
but it said that we don't really know, and there
are quite a few moving parts there. Something else that
people will be interested in is it's doesn't think house
price growth will recover too much, so it actually thinks
house prices annually will will keep falling at the start
of this year and then sort of return to single
digit growth. So it doesn't believe that lower interest rates

(03:48):
will see house prices take off anywhere close to the
way they took off during the pandemic.

Speaker 1 (03:53):
Interesting stuff, jan I think he was always to know.
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