Bruce Patton: mortgage advisor on why the banks haven't factored latest OCR cut into their fixed-term rates

Mortgage holders have been hoping the banks will pass on the latest 50 basis point cut to the OCR - but many will have to wait.

New Zealand's major banks have all cut their floating rates, but only ASB's fixed-term mortgage rate has moved down so far.

Mortgage advisor Bruce Patton says the banks had largely predicted the OCR would drop by 50 basis points - and priced their earlier cuts accordingly.

"We saw a few banks move a few days before, we saw the BNZ come down from 6.49 to 5.99 on the Monday before the OCR was even announced. A lot of the rates had already moved." 

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Episode Transcript

Speaker 1 (00:00):
If you have a mortgage and you've been waiting and
waiting for your bank to pass on last week's fifty
basis point cut to the OCR, you might be waiting
for a while. Banks have all cut their floating rates,
but the term rates haven't really moved much since last week.
Bruce Patten is a mortgage advisor with US This evening
killed up.

Speaker 2 (00:19):
Hi there, how are you?

Speaker 1 (00:20):
Yeah? Well, thanks, So the OCR has been cut by
fifty basis points. Why haven't all mortgage rates been cut
by the same amount.

Speaker 2 (00:27):
Well, you'll have seen that all the floating rates will
have probably almost all come down by now, a lot
of the fixed rates. It's not the OCR doesn't directly
relate to just them that there's people money on tom deposit.
You've got their swap rates for the overseas wholesale market.
And the other big fact at this time was that
everybody had fully priced in that we were going to

(00:50):
get fifty basis points, whereas the last two cuts it
was what are we going to get? Are we going
to get one? How much is it going to be?
So the market didn't really know this time. They knew
we're getting fifty maybe seventy five, So We saw a
few banks move a few days before we saw the
ben Z come down from six point four nine to
five nine nine on the Monday before the OCR was

(01:10):
even announced. Yeah, so a lot of the rates had
already moved.

Speaker 1 (01:13):
Yeah, there was a bit of movement heading up to
the announcement itself. Does that mean that when it comes
to those fixed term rates we're unlikely to see more
movement until we get closer to February's next cut?

Speaker 2 (01:25):
That's right. I think that's probably it for Christmas. You
might get lucky, some bank might decide they're going to
bring out a little special but I would say not,
because what you've got to remember is rates were over
seven only in August and we're now right down to
less than five and mid five in some cases. So
you know we've had what one point twenty five off

(01:45):
the OCR. Well, we've already had at least one point
twenty five off the fixed rates. So that says to me,
we've got all we're going to get.

Speaker 1 (01:52):
What are people fixing for right now?

Speaker 2 (01:56):
Mostly short term six or twelve months. If I was
to give anyone any advice, it would be just be
careful about fixing too long, because once everybody starts to
jump into those two three five year fixed rates, you
might see them start to go back up a bit
because at the moment no one's using them, so the
banks really aren't doing anything with it. So my advice is,

(02:17):
don't leave it too long. If you can afford. If
we see a rate at say five or four nine nine,
if we were lucky and you can afford that, take it,
then don't try to wait for another one point one
point two. Fix it when it's affordable for you.

Speaker 1 (02:31):
Yeah. How competitive are the banks right now?

Speaker 2 (02:35):
Well, like, well, they're a bit like petul companies, right.
They tend to feel allow one another quite quite closely.
And you've got to remember they're all sourcing their money
from the same place as well, so that it costs
them the same wherever. So when they're giving a special,
they're generally taking a bit of a hit, so they

(02:56):
don't tend to stay around for very long. So ain
z one year at five five nine, not long before
the official cash rate. But then they did away with
it because I think they saw that maybe the rate
wasn't going to be cut by point seventy five, so
they thought, well, we better get rid of it. Because
it's costing us money. So yeah, so sometimes they will
when they're trying to attract new business, and other times

(03:19):
they're out of the market, but generally they're all much
of a muchness to be honest.

Speaker 1 (03:23):
Yeah, all right, thanks Bruce, appreciate it. That is Bruce Patten,
mortgage advisor. For more from Hither Duplessy Allen Drive, listen
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