Banks are cutting their mortgage rates to the lowest levels in five years in response to the Reserve Bank's official cash rate review tomorrow - and property investors will be making the most of it.
TSB Bank dropped its 12-month fixed mortgage rate to 5.98 per cent onMonday, after Kiwibank and BNZ which dropped their rates to 5.99 per cent on Friday.
BNZ chief economist Tony Alexander said the bank expected Reserve Bank governor Allan Bollard to cut the official cash rate by 100 basis points on Thursday and the bank had moved its mortgage lending rate in anticipation of the move.
He said he expected the official cash rate to drop to as low as 3.25 per cent in the coming months.
"I think within a few weeks you will be able to get some home mortgage rates around the 5.5 per cent area and that will be about as low as they are going to go," Mr Alexander said.
Mortgage rates have not been this low since July 2003 and the lowest rates recorded on interest.co.nz were in November 2001 when ASB and TSB dropped rates to 4.95 per cent.
David Tripe, director of Massey University's centre for banking studies said the mortgage rates offered by TSB, BNZ and Kiwibank were realistic. He would not be surprised to see other banks follow suit this week but said some believe the official cash rate will be cut further than 100 basis points so some banks might wait until Thursday and bring rates down further.
Martin Evans, president of the New Zealand Property Investors' Federation said property investors were expecting this year to be a good year to get a return.
Investors are expecting house prices to come down, rents to go up due to less stock and more demand and mortgage rates to fall, he said.
