What's the clever move to make with your mortgage? Photo: fantasista/123RF
There's light at the end of the cost of living tunnel, though insurance costs are likely to remain high, an economist says.
The country's biggest bank, ANZ, cut retail interest rates on Wednesday in the wake of softer than expected inflation numbers.
It followed Westpac last week dropping its home loan interest rates after the Reserve Bank softened its stance on the outlook for the official cash rate.
ANZ's chief economist Sharon Zollner told Morning Report consumer price index data suggested inflation would be back in the 1-3 percent target range.
She predicted the Reserve Bank would start cutting the official cash rate by October or November.
Recent interest rate moves by banks were pre-empting that, Zollner said.
"Of course because most people are fixed it's not going to make an immediate difference to most people but there's light at the end of the tunnel."
Most borrowers were sticking to short six or 12 month terms in anticipation of cuts, she said.
"It's not a bad idea to split up your mortgage and put a bob each way, it sort of rules out nailing it, but it also rules out regretting it because you got it completely wrong."
While council rates had likely peaked and rent levels for new tenancies were moving downward, insurance premiums would "continue to be a bugbear".
"The Reserve Bank will focus on core inflation and sort of park those things that they can't do much about.
"Of course people don't just buy core goods, they have to buy what they have to buy and insurance is a necessity, so it's ok for the Reserve Bank to say they'll look through it but it's harder for households," Zollner said.
Loan Market director and mortgage broker Bruce Patten had clear advice for borrowers - stick to fixing for shorter periods.
People shouldn't be sucked into the lower longer term rates, he told Morning Report.
"The rates will come down, dont expect 2s or 3s but certainly by this time next year you would expect something in around the mid 5s.
"Everything is pointing towards the fact that we're going to have lower rates... it'll happen this year it's just whether it happens before November."
