ANZ Economists Urge Homeowners to Fix One-Year Mortgage Rates Amid Flat Property Market

ANZ economists are suggesting that homeowners consider fixing their mortgage rates for one year rather than two years, citing current market conditions. According to their latest Property Focus update, house prices are largely on a flat path, and interest rates have moved in the past month as wholesale rates fell alongside oil prices.

The report notes that one-year fixed mortgage rates range from 4.75% to 4.99%, while two-year fixed rates range from 5.19% to 5.45%. ANZ strategist David Croy stated, 'While we still expect the RBNZ to lift the OCR next month, lower oil prices will take some of the heat out of inflation and buy the RBNZ more time.'

Croy argues that fixing for longer gives more certainty but costs more too. He calculates that the median one-year rate would need to rise to 5.83% in a year's time before two one-year fixes would cost more than fixing for two years now at 5.29%. The strategist believes that the OCR would likely need to be nearer 4% than 3% for one-year mortgage rates to get closer to 6% rather than 5%.

However, Croy emphasizes that uncertainty is high right now, and homeowners' tolerance for risk or a possible unpleasant surprise will determine whether they opt for a longer term or a mix of terms. 'If your tolerance for risk is low, a longer term may suit you better,' he advises.