Home owners could face higher mortgage payments if the Reserve Bank doesn't cut rates further this year. And if the official cash rate does fall bank deals are unlikely to go much lower, economists say.

The problem for local banks is that volatile financial markets have pushed up credit risk, raising the cost of borrowing. New Zealand banks still rely on international funding for 25-30 per cent of the lending.

Speaking on The Economy Hub video panel show, ANZ senior economist Sharon Zollner said NZ banks were having to pay more for overseas funding.

"We think that is going to be persistent and the longer it carries on the more pressure it will put on retail rates."


Mark Lister, head of private wealth research at Craigs Investment Partners, said although financial market turmoil had eased a bit in the past week or so, he did expect to see further volatility. "I think that is just something we are going to have to accept over the next few years because of where we are in the cycle and where global debt levels are."

Massey University banking specialist David Tripe said it did appear cut-price specials we had been seeing were starting to dry up and anecdotally he had heard of banks paying more to borrow in international markets.

The good news is that most economists now expect the Reserve Bank to cut rates later this year - although few expect a move next week when Governor Graeme Wheeler delivers his first full monetary policy statement of the year.

ANZ, ASB and Westpac are all picking two more cuts this year - likely beginning in June.

Just don't expect that to translate into even lower mortgage rates at this stage.