Photo: RNZ
When the official cash rate was cut by 50 basis points on Wednesday, the banks responded by passing on the full cut to floating rates.
But although many New Zealanders might have some of their lending floating, the bulk of our home loans is on fixed terms.
So how much have those borrowers benefited from the reductions in the OCR?
It has dropped from a peak of 5.5 percent to 4.25 percent now, a drop of 125 basis points.
Back in July, before cuts began, Reserve Bank data shows that the average six-month special rate was 7.07 percent. The average one-year was 6.87 percent and the average two-year 6.54 percent.
Three- to five-year fixes were between 6.31 percent and 6.39 percent.
Now, six-month fixes are being advertised around 6.4 percent to 6.5 percent - a drop of about 60 basis points, or half the reduction in the official cash rate.
One-year special rates are advertised at about 5.8 percent, so roughly 90 to 100 basis points below the July point.
Two-year rates are advertised at 5.69 percent, or 85 basis points below.
Three- to five-year terms are about 5.69 percent, so about 70 basis points down.
"Obviously the declines at the longer end are much less," Infometrics chief forecaster Gareth Kiernan said.
"Part of it will be some of the cuts would have been priced in by markets before July. The one-year rate peaked as long ago as November or December and then didn't move much until April."
He said longer-term rates tended to be less influenced by the OCR and more by medium-term expectations around inflation and what wholesale rates were doing, which could be internationally driven.
"That's why those haven't come down as much."
Simplicity chief economist Shamubeel Eaqub said mortgage rates tended to be two percentage points higher than swap rates. Swap rates usually priced in future OCR moves with about a six-month lead.
From the peak in December and January, rates have fallen further.
In December, the average six-month rate was 7.36 percent, the average one year 7.3 and the average two-year 7.36 percent.
By that measure, the six-month rate is down 86 basis points, the one-year rates about 150 basis points, and the two-year rates 167 basis points.
The latter two are more than the official cash rate has dropped, indicating that further cuts have already been priced in.
What about savers?
The rates paid to people with money in term deposits have been slower to move but cuts have picked up pace recently.
From a peak of about 6.1 percent for a one-year term deposit in October, a one-year rate is now more like 4.75 percent or 4.85 percent for a year.
Kiernan said those rates could also be affected by increased demand for lending from banks. That can sometimes lead banks to compete harder with higher rates, to get more funds in to support lending.
"They will be trying to balance that against making sure they have enough money coming in the other side."
What now?
While expectations have generally been that interest rates might not fall a lot further through next year, Kiernan said there were some complicating factors.
The Reserve Bank's OCR track published this week showed the rate going lower than in its August forecast.
In August, it expected the OCR to be 4.6 percent in March. This week, it forecast 3.4 percent.
Kiernan said what that meant for interest rates would depend on how financial markets reacted.
If they took it as confirmation that earlier forecasts of the need for sharper rate falls were right, it might not have much retail impact.
But if it prompted markets to think rates could come down yet faster, it could mean lower interest rates for borrowers.
But on the other side of the equation, there were "fairly big" increases in longer-term swap rates through October and early November, of up to 50 basis points.
"All things being equal that should put upward pressure on some of those long-term mortgage rates. Those have reversed out partially in the last week or ten days but we don't know where they are going. They are very much driven by concern coming out of America about Trump's various policies."
