Mortgage rates falling but risks in fixing - ASB
Page 1 of 2 ..... 11:43AM Wednesday Nov 05, 2008

Mortgage rates are coming down, say ASB economists, making it risky to fix an interest rate for too long.

In its Home Loan Rate Report, the bank lays out the pros and cons of taking out mortgages for varying terms.

"Mortgage rates have been declining ever since it became clear that the RBNZ would move to cut the Official Cash Rate (OCR) as the economy weakened noticeably," said bank chief economist Nick Tuffley.

Fixed mortgage rates were the first to fall as wholesale rates progressively priced in the expectation of earlier and greater interest rate cuts from the Reserve Bank.

With the OCR itself now falling, floating mortgage rates have started to follow, he said. He expected the OCR to continue to decline to 5.5 per cent in the early parts of next year.

Mortgage rates will keep coming down as the OCR falls, but the financial markets have already factored in these continuing falls, so any drop in longer-term fixed rates was now "likely to be more muted".

More here.