- Homeowners expecting mortgage rates below 4% in 2025 may be disappointed, experts say.
- Short-term rates could bottom out at 4.5% within six to 12 months, with longer-term rates higher.
- Most clients are locking in six to 12-month rates, anticipating lower rates upon refixing.
Homeowners counting on a mortgage rate of less than 4% in 2025 are likely to come up short, experts have told OneRoof.
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This week BNZ cut its standard one-year rate to 4.99%, while ANZ and Kiwibank have cut their one-year special rate to 4.99%. Several brokers and economists interviewed by OneRoof believe short-term rates will bottom out at around 4.5% in the next six to 12 months, with longer-term rates sitting slightly higher.
GV Mortgages Financial Services mortgage broker Gareth Veale said the post-Covid offers of long-term rates in the low threes were the exception rather than the rule and unlikely to happen again anytime soon.
He predicted that the best deals in 2025 and 2026 would be with short-term rates, noting that a one-year rate of 4.5% could be up for grabs within the next few months.
“Before Covid those who went on the one- and two-year rates saved a lot more in interest over time than those who locked in for longer terms. Covid threw a curve ball to that mentality – the one- and two-year rates jumped up quickly, but that is not the norm.”
He said most of his clients were locking in rates for six to 12 months, expecting they’d get a lower rate when they refixed. The short-term swap rates also showed that the banks were making more money from shorter-term rates, so they could afford to drop them if they chose to, but there was less room to maneuver on the longer-term rates.
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“If people are going to bring a ‘lock in for longer‘ mentality to their next rate review, they might find themselves on the wrong side.”
Infometrics chief forecaster Gareth Kiernan agreed that everything pointed to short-term rates bottoming out at around 4.5%. Anything below that would be surprising and a sign of “significantly weaker economic conditions”.
Kiernan said longer-term rates appeared to be more volatile and vulnerable to global and domestic pressures, such as the current tariff situation.
Tella chief executive Andrew Chambers said banks might have to drop longer-term rates to entice customers to commit for longer. Photo / Supplied
Tella chief executive Andrew Chambers pointed out that any rate below 5% was actually below the long-term average.
However, he had a slightly different view on the long-term rates. He expected them to drop further because banks were trying to get customers to lock in for longer.
Chambers said about 90% of customers were on shorter-term loans, which was a “real problem” for the banks.
“I’ve been waiting since this month’s OCR announcement to see what the banks do in the three-year range because I feel like they might lower those rates,” he told OneRoof.
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