At the time of writing the OCR is sitting at 4.25 per cent and the expectation is that we will see this increase to around 5-5.5 per cent over the next two reviews.

However, recent events such as lower inflation numbers than expected has meant that expectations are somewhat being reduced. It is possible we will still see an increase of at least 0.50 per cent in February, but there still may be another increase in April if we don’t gain more traction on keeping inflation under control. Remember that the RBNZ target is between 1-3 per cent, not the recently recorded 7.2 per cent.

For the first time in quite a while we have seen some long-term interest rates (three-five years) as cheaper than short-term interest rates (six months to two years). In many cases in a rising interest rate environment it can be tempting to take a longer term interest rate (especially one that is cheaper than a short-term rate) to give yourself some certainty and also have the best rate.

However, an interest rate curve like the one we have is an indication that markets expect the rates to come back down again in the future.

LOCKED-IN RATES

As a result you might find yourself locked in for an extended period of time to a rate that only looks attractive compared with the current rates around it, and may not be as attractive in the near future. In addition, trying to get out of this long-term fixed rate might mean significant break fees if you want to break early.

If you’re unsure how all of this works, or how it may apply to you, then it’s definitely worth having a discussion with a mortgage adviser to assist you with your own personal situation.

Something else worth noting is the fact that there are some commentators suggesting the RBNZ should put a hold on OCR increases given the extent of damage caused by Cyclone Gabrielle, and review this in April. It will be interesting to see the results of the OCR review.

TALK OF THE MARKET

Currently banks are offering fixed rates anywhere between 6.54 per cent for one year and 7.69 per cent for five-year rates, depending on the bank and whether or
not you’re offered a special rate.

It’s worth pointing out that BNZ have been the talk of the market with their headline 4.99 per cent interest rate for 12 months in the effort to grab market share.

This is applicable for new clients only. There is no cash contribution attached to this (whereas other banks are offering up to 1 per cent cash contribution with new lending) so be aware of the cost(s) of moving bank. This special offer ends soon and isn’t currently being matched by other banks.

As always it’s worth reviewing your current mortgage structure to ensure it is still appropriate for you and your plans in the future. Small changes in the way your loans are structured could cause massive differences in the savings you make and the time it takes to repay your mortgage.