What's Happening?
Despite a 100 basis point reduction in the Official Cash Rate (OCR) since August, fixed mortgage rates have remained largely unchanged. This is due to several factors, including the reluctance of financial market participants to lower swap market pricing and the depreciation of the New Zealand dollar, which has led foreign investors to demand higher returns. Additionally, banks are under pressure to maintain higher term deposit rates to retain funding, as savers have been withdrawing funds at an increasing rate. This has resulted in banks being unable to pass on the full benefits of the OCR reduction to mortgage rates.
Why It's Important?
The unchanged fixed mortgage rates, despite a significant reduction in the OCR, highlight the complex dynamics of the financial
markets. This situation affects both borrowers and lenders, as banks struggle to balance the need to attract depositors with the demand for competitive mortgage rates. The reluctance to lower rates could impact the housing market, potentially slowing down borrowing and affecting homebuyers' affordability. This development underscores the importance of understanding the broader economic factors that influence interest rates beyond central bank policies.
