Home loan borrowers should see rates below 5 percent before too long, one mortgage expert says.
The official cash rate is expected to be lowered by another 50 basis points in February, and further cuts are predicted later in the year.
Wholesale rates have fallen since the last OCR cut, and the two-year swap rate is down 20 basis points from the time of the last gross domestic product (GDP) release, which showed New Zealand had been through another recession.
David Cunningham, chief executive of mortgage broking firm Squirrel, said it meant there was at least 20 basis points to come off home loan rates "almost immediately".
"Further, I think there is potential for mortgage rates to fall by about 0.5 percent in the next month or so, even without OCR changes.
"That's because banks are still paying 5 percent for six-month term deposits versus a wholesale rate for six months of 3.8 percent. I think those term deposits will drift down to 4.5 percent, enabling home loan rate cuts. Sub-5 percent is on the horizon."
At present, the lowest advertised rate from the big five lenders is 5.49 percent for three years, offered by both ASB and Westpac.
Economist Shamubeel Eaqub said he would expect home loan rates to move with swap or wholesale rates.
"Although I would note the decrease in recent weeks have been on a small scale."
Two-year swap rates have fallen from a peak of 5.79 percent in October 2023 to just over 3.4 percent.
The one-year rate has fallen from 5.69 percent in February last year to just over 3.5 percent.
Some of that is the effect of markets pricing in what they expect to happen.
Late last year, BNZ chief economist Mike Jones pointed out that home loan rates had fallen further than the OCR so far, in part because wholesale markets were already reflecting the cuts forecast to come.
He said someone buying a median-priced house with a 20 percent deposit would be paying about $9000 a year less in interest than they were at the start of the year.
He said 51 percent of all mortgage borrowers would have their mortgages reset over the first half of this year.
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