2024 Predictions: Will Interest Rates Drop? Strategic Home Loan Refix! 

Introduction

As we step into the new year and resume our routines after the holiday season, the forefront of many discussions revolves around the intriguing topic of mortgage rates. Amidst conflicting opinions from media and experts, the question on everyone's mind is whether interest rates will witness a decline in the near future or if we need to wait until the latter part of this year or even 2025. The uncertainty surrounding this issue can be perplexing for many.

In this article, we delve into the current scenario to shed light on the intricacies of the situation, aiding you in making more informed decisions.

Understanding Wholesale Rates

Let's begin by unraveling the mystery of wholesale rates. These rates represent the amount that banks pay to borrow money on the international market, ultimately influencing the mortgage rates available to us. In recent months, there has been a noteworthy drop in wholesale rates, exceeding 0.5%.

While one might anticipate that banks would pass on these rate cuts to mortgage holders, the reality observed in December was quite the opposite. Banks were focused on recuperating lost margins due to increased competition for business over the past year.

Predicting Mortgage Rate Trends 

Now that margins have stabilized, the crucial question arises: Will banks extend the benefits of lower wholesale rates to mortgage holders? The expectation here is that interest rates might witness a decrease within the current year, possibly in the second half. However, the Reserve Bank of New Zealand has outlined plans to defer lowering the Official Cash Rate (OCR) until 2025, aiming to manage inflation that could potentially be triggered by a drop in mortgage rates.

How to refix your home loan 

Here’s a table showing the recent rates for these terms, offered to our clients. 

For many banks, the rates for 6-month, 1-year, and 18-month terms are closely aligned. It is advisable to choose between a 6-month and 1-year term, as floating rates are currently on the higher side, and an 18-month commitment might be deemed too long. Depending on your bank, opting for a 6-month or 1-year term is recommended based on the rate comparison.

For mortgages with BNZ or ASB, a 6-month term seems preferable due to comparable or better rates than the 1-year option. In the case of other banks, the 1-year term is favored as it tends to be slightly cheaper, and there is ample time to wait for potential rate decreases.

Important Considerations

It's imperative to acknowledge that these predictions are grounded in current economic conditions, which are subject to change. Global economic trends, domestic performance, and RBNZ policies are all influential factors in rate adjustments, making it crucial to remain attentive to potential shifts. Additionally, the insights provided in this article are not personalized advice. For guidance tailored to your specific situation, please consult with your mortgage adviser.

Conclusion

Thank you for joining us on this exploration of 2024's mortgage rate landscape. We trust that this information has provided clarity, assisting you in making well-informed decisions regarding your mortgage rates. If you have further questions or require assistance with your mortgage inquiries, do not hesitate to reach out. Stay informed by subscribing for regular updates and insights.

Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.