Official cash rate dropped to record low

The Reserve Bank has cut the official cash to the lowest rate ever, dropping it 1.5% after being static on 1.75% for two and a half years. Banks quickly indicated drops in mortgage interest rates.

The dropped had been signalled by the Reserve Bank in March, so wasn’t a surprise, but there have been effects on markets.

RNZ Analysis: What the OCR cut means for you

Even for the informed and interested, the past two-and-a-half years have been exercises in “deja vu all over again” as the RBNZ held its official cash rate steady at 1.75 percent, repeating a mantra of the risks being balanced, with the next move likely to be a rise, probably in a year or two … or three.

But that changed in March when the RBNZ governor Adrian Orr said the risks were now tilted to the downside and the next move was more likely to be a cut.

That made the latest monetary policy statement a live event worth following.

Mr Orr and the RBNZ’s newly established monetary policy committee have delivered a rate cut, that may be followed by another later in the year.

But was a rate cut needed, and more importantly will it work?

Opinion has been divided, with backers of a rate cut saying a slowing economy, cooling housing market, stubbornly low inflation, lower immigration, and a gloomier international outlook justified lower rates to stimulate the economy.

Our economy is relatively healthy so why the change down?

New Zealand is doing better than many economies, with growth around 2.5 percent, consumers are still spending and businesses investing, although perhaps not as freely as before, unemployment is close to a 10-year low, and domestic inflation pressures have been bubbling quietly beneath the surface.

One commentator said before the decision that a rate cut would be like sending out the whole fire brigade to rescue one kitten up a tree.

Immediate effects:

The retail banks have been quick to pass on some of the latest cut with floating and fixed mortgages lowered by a little over a tenth of a percent, while deposit rates have also been reduced, which will hurt those relying on their savings with in the bank.

The New Zealand dollar initially fell three quarters of a cent against the US dollar, before reclaiming much of the lost ground and settling about a quarter of a cent lower.

People with mortgages will be happy that their interest rates remain low or will nudge down a bit more.

Banks have already been criticised for not dropping mortgage rates by the whole .25%, but they may adjust them further as they work out how things look and what their business competitors do.

Unemployment down, Fonterra down, OCR flat

Despite negative business confidence there are some good economic signs, with unemployment down and the OCR being left low by the Reserve Bank with an indication it will stay low through next year and into 2020. This will keep interest rates low. However the news is not so good for Fonterra and their many shareholder farmers.

Employment rates at record high

Today’s record employment rate of 68.3 percent, matched by the lowest unemployment rate of 3.9 percent in over a decade means better lives for thousands of New Zealanders, Minister of Employment Willie Jackson says.

“There are now over 2.66 million New Zealanders in employment which means that 29,000 more people and families are engaged in earning since the last quarterly results were released”.

“The underutilisation result for this quarter has continued the recent downward trend and has fallen further to 11.3 percent. This is an indication that people who want to work, are able to work.

“The reduction in the unemployment rate for Māori to 8.5 percent (down from 9.9 percent) is a further example of our continued focus on improving outcomes for our people and while this is the lowest it has been in over a decade, the work doesn’t stop.

Today’s Household Labour Force Survey release shows a further reduction in the NEET rates for 15-24 year olds from 10.9 to 10.1 percent.  This is a down from the same time last year when our young people not earning or learning were at 11.3 percent.

Unemployment drop another sign of strong economic fundamentals

Today’s drop in the unemployment rate to its lowest level in over a decade is another real example of New Zealand’s strong economic fundamentals, Finance Minister Grant Robertson says.

The unemployment rate fell to 3.9% in the September 2018 quarter, the lowest since June 2008. At the same time, the employment rate rose to a record high of 68.3%.

So that is all good news.

Yesterday from the reserve Bank: Official Cash Rate unchanged at 1.75 percent

The Official Cash Rate (OCR) remains at 1.75 percent. We expect to keep the OCR at this level through 2019 and into 2020.

The pick-up in GDP growth in the June quarter was partly due to temporary factors, and business surveys continue to suggest growth will be soft in the near term. Employment is around its maximum sustainable level. However, core consumer price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy.

GDP growth is expected to pick up over 2019.

Downside risks to the growth outlook remain. Weak business sentiment could weigh on growth for longer. Trade tensions remain in some major economies, raising the risk that trade barriers increase and undermine global growth.

Upside risks to the inflation outlook also exist. Higher fuel prices are boosting near-term headline inflation.

So this is generally looking good, especially for those with mortgages and business loans. Not so good for those with interest earning investments.

While dairy farmers will like the low interest rates not all is well for them.

ODT: Fonterra told it must ‘do better’

Fonterra’s financial performance since its inception has been “unsatisfactory”, a report has found.

The report said the country’s largest dairy co-operative had failed to deliver meaningful returns over and above the cost of capital since inception.

Milk growth over the past 15 years had been an impediment but was now largely past. It had been critical that was addressed to ensure continued supply of milk and capital.

Mr Hurrell told around 300 farmer shareholders at the meeting the company had plans to turn around its financial performance and no longer aimed to produce as much milk as possible.

RNZ: Fonterra’s ‘sorry’ not enough for all shareholders

Fonterra managers met with 400 shareholders in Waikato today to apologise for their nine-figure loss. As Eric Frykberg reports, while many farmers backed the co-operative, others were fuming.

Global dairy prices have been trending down all year – see

Mixed confidence news – RNZ:  Consumer confidence drops to lowest level in three years

The ANZ-Roy Morgan consumer confidence index fell three points last month to below its historical average.

The future conditions index was down five points to the lowest level since 2015.

The chief economist at ANZ, Sharon Zollner, said the pessimism about the future has spread from being about the broader economy to individuals’ future financial position.

But consumers were still relatively confident about current conditions, with a net 11 percent feeling better off than they did a year ago.

Auckland Business Chamber – Encouraging signs for business confidence

Auckland’s SME (Small and Medium Enterprise) sector displayed a changing view of business confidence in Auckland Chamber’s latest quarterly survey.

“Confidence amongst Auckland business showed a 10% improvement on last quarter,” said Chamber CEO Michael Barnett.

The survey of more than 700 respondents recorded 48% of respondents expecting conditions to deteriorate over the next six months compared to 54% from the previous survey.

“This in part reflects the move from winter into summer and the start of the holiday season, but it is a positive,” said Barnett.

“Despite this, the survey reveals elements of uncertainty that SME’s are having within a changing business environment.”

So mixed signals there too.

Business confidence heading downwards

Decreasing business confidence should be making Grant Robertson and the Government a bit uneasy.

Stuff: Latest plunge in confidence sends ‘strong warning signals’ and talk of interest rate cut

A sharp fall in business confidence in June has ignited debate that the Reserve Bank may look to cut the official cash rate to a fresh record low.

On Thursday the central bank will review the cash rate and is widely expected to leave the OCR unchanged at 1.75 per cent, where it has been since November 2016.

That should at least keep mortgage rates down.

Asked about their general outlook for the entire economy, a net 39 per cent said they expected conditions to deteriorate in the coming year, a fall of 12 points on May.

Survey participants were more upbeat about the likely activity in their own business, with a net 9 per cent optimistic, but this was a 5 point fall from May and remains well below the long term average.

Significant drops…

While the monthly figures fluctuate, business confidence has been falling since June 2017, ANZ senior economist Liz Kendall said.

…and part of a longer downward trend.

Toplis said the ANZ survey, coupled with other indicators, represented “very strong warning signals”, including concerns about regulatory changes and a sharp drop in hiring intentions..

“It doesn’t matter whether uncertainty about a new government is justified or not, what we do know is that uncertainty causes deferred investment and that means lower actual and potential economic growth,” Toplis said.

“If employment growth slumps, as intimated by this survey, then economic activity will be adversely affected too.”

So the Government will have to play things carefully – with pressure of public service secots going on strike for substantially more pay.

The survey said that finding skilled staff was the most common problem seen by businesses, followed by regulation. Raised as a problem by 17 per cent of businesses, it was the highest reading for this problem since this data started being collected in March 2012, ANZ said.

Regulation is often claimed to be a major factor in the housing shortages, but it is also an ongoing issue with employers.

Meanwhile: Step forward for Bill giving 10 days’ leave to domestic violence victims

A Bill that would give victims of domestic violence 10 days of paid leave has taken a step forward.

It will now only need to pass its third reading, likely at some point in July.

It’s passed with support from the Government parties, and objection from National and ACT. If it passes, the law will come into effect from April 1, 2018.

The Opposition say the Bill is bureaucratically-heavy and expensive for employers. Mark Mitchell proposed a change to the Bill that would replace domestic violence leave with a clause making it explicit domestic violence is a legitimate reason to take annual or sick leave instead.

So more regulation and administration.

And it also means that victims of domestic abuse will need to justify leave on that basis to their employer.

Human error correction doubles inflation

After discovering a ‘human error’ Statistics New Zealand has adjusted the inflation rate for the year to September, doubling it to 0.4%.

Stuff: Rego error at Statistics NZ doubles inflation, complicates life for Reserve Bank

Human error has been blamed for a mistake in official figures about the cost of living, creating a new headache for the Reserve Bank on whether to cut interest rates.

On Monday morning Statistics New Zealand blamed a “manual processing error” for its decision to correct its estimate of the increase in inflation in the year to September, from 0.2 per cent to 0.4 per cent.

The mistake related to how much the agency believed the cost of licensing a small car – commonly referred to as registration or ‘rego’ – had dropped in the September quarter.

I’m surprised that one mistake on one class of car registration makes that much difference.

This change may complicate this weeks Official cash rate annoiuncement.

Although the correction may appear minor, and inflation remains below the official target, it adds weight to the arguments against the Reserve Bank lowering the official cash rate (OCR) on Thursday to a new all time low of 1.75 per cent.

Most bank economists were already questioning the need for a further cut even before the correction was announced.

“I still think the Reserve Bank shouldn’t be cutting rates,” Bagrie said.

“If it were me, I’d be biased towards holding [the OCR at 2 per cent]. But I think [the Reserve Bank’s] forward guidance has been so strong that they’re going to find it hard to step away [from cutting].

I’m not sure what difference it will make whether the OCR is lowered or not as banks have already indicated that mortgage rates are likely to go up anyway due to international rates.


Mortgage rates likely to rise

Despite a prediction that the Official Cash Rate will be lowered again this week it seems that mortgage interest rates are likely to rise due to rising international borrowing costs (swap rates).

NZ Herald: Borrowers to face higher home-loan rates

Home loan borrowers look set to face higher fixed-term mortgage rates despite a predicted cut to the official cash rate this week.

ASB increased the fixed-term rates for its three and five year mortgages on Friday and other banks are expected to follow suit.

On August 15 the five year swap rate was 2.08 per cent while on Monday last week it was 2.42 per cent, he said.

The three-year swap rate had risen from 1.98 per cent to 2.23 per cent over the same time.

Those of us with mortgages have had it good for a while now, with record low interest rates. They are down markedly to about half what they were eight years ago.

But this was unlikely to last. We just have to hope they won’t go up much.

OCR unchanged

The Reserve Bank has left the OCR at it’s record low today, as expected.

Official Cash Rate unchanged at 2.25 percent

Statement by Reserve Bank Governor Graeme Wheeler:

The Reserve Bank today left the Official Cash Rate unchanged at 2.25 percent.

The outlook for global growth has deteriorated over recent months due to weaker growth in China and other emerging markets. Prices for some commodities, including oil, have picked up but remain weak.

Monetary conditions are extremely accommodative internationally, with considerable quantitative easing and negative policy rates in some countries. Financial market volatility has eased in recent weeks, but markets continue to watch closely the policy settings of major central banks.

Domestically, the economy is being supported by strong inward migration, construction activity, tourism, and accommodative monetary policy. Dairy export prices have improved slightly, but are below break-even levels for most farmers.

The exchange rate remains higher than appropriate given New Zealand’s low commodity export prices. A lower New Zealand dollar is desirable to boost tradables inflation and assist the tradables sector.

There are some indications that house price inflation in Auckland may be picking up. House prices remain at very high levels and additional housing supply is needed. Housing market pressures are building in some other regions.

There are many uncertainties around the outlook. Internationally, these relate to the prospects for global growth, particularly around China, and the outlook for global financial markets. The main domestic risks relate to weakness in the dairy sector, the decline in inflation expectations, the possibility of continued high net immigration, and pressures in the housing market.

Headline inflation remains low, mostly due to low fuel and other import prices. Annual core inflation remains within the target range. Long-term inflation expectations are well-anchored at 2 percent. However, as we have previously noted, there has been a material decline in shorter-term expectations.

We expect inflation to strengthen as the effects of low oil prices drop out and as capacity pressures gradually build. Monetary policy will continue to be accommodative. Further policy easing may be required to ensure that future average inflation settles near the middle of the target range. We will continue to watch closely the emerging flow of economic data.

New Zealand still has hardly any inflation and it’s expected to take until the first quarter of 2018 until it gets up into the target range:




Hosking slams MediaWorks over leak

NBR journalist Rob Hosking has been scathing of MediaWorks after it was revealed today that at least two of their employees had been responsible for a leak of a confidential OCR announcement from a lock-up.

“…frankly a contemptible lack of integrity all round”.

He is also scathing of modern shock-horror journalism.

Rob Hosking blasts Mediaworks’ OCR leak on


NBR article (paywalled): The Reserve Bank leak – a matter of integrity

Hosking also made some comments in a thread on Twitter:

Well for a start people lied. Call me old fashioned.

Secondly, its a breach which could have led to a crime.

I didn’t see it as defending Mediaworks, only the value of lockups but lock ups are clearly of more value without Mediaworks in them. Can’t be trusted.

This wasn’t just stupidity. This was an absence of integrity.

If you’re cool with insider trading – whether or not it’s a crime – this is no big deal I spose

First, a disclosure. I’ve been covering Reserve Bank monetary policy statements for 19 years. I was in the lock up last month when a journalist from Mediaworks’ radio outlet, Radio Live, sneaked the decision out an hour before the embargo was lifted.

The intro calls the Reserve Bank OCR as one of the country’s most sacrosanct embargoes.

Andrew Paterson: Well the decision by the Reserve Bank to discontinue it’s six weekly OCR media and analyst lock-ups in the wake of an embargo  breach by a junior  MediaWorks reporter has raised the ire of seasoned business journalists who have condemned the actions of the reporter in question for breaching what had been one of the country’s most sacrosanct embargoes.

The Reserve Bank took the action after preparing a detailed report into the breach.

Joining me to discuss this is NBR’s political and economic correspondent Rob Hosking.

Rob you’ve obviously been a veteran of these lock-ups, you must be disappointed in this action by the Reserve Bank.

Rob Hosking: Disappointed puts it mildly. I’m more disappointed in the actions of MediaWorks, because look, it was their actions that triggered this, right. They had the choice.

I don’t think the Reserve Bank had any choice but to take some drastic action, I think they’ve gone too far and we’ll come back to that a little bit later, but the point about these lock-ups is they’re a contract, which each journalist, and the organisation they represent, enters into when they go into that lock-up.

And that basically is you do not communicate with the outside until the embargo is lifted.

And the reason for that contract is not some cosy little stitch-up or anything, the reason is you have two hours, absorb in the case of the monetary policy statement, what is often a quite complex document, it often contains significant changes in the outlook for the economy, and it certainly often contains changes in the Reserve Bank’s thinking on the economy and where it’s next move might go.

And it’s the opportunity to quiz a couple of Reserve Bank economists on just sort of what they mean by some of the material that’s in documents, and it means you can report on it fully and accurately and you can actually not only just report on what’s in there but you can give some analysis of it.

And that is very very important the conduct of the economic debate in this country, which for a long time when i was growing up was very very poor.

And i think those lock-ups have helped contribute quite significantly to the quality of economic debate in this country.

And don’t forget one of the things the Reserve Bank acts as is as a sort of referee on the Government policies of the day no matter who that Government is, and that role which is not actually written into the Reserve Bank Act.

But it is effectively because of what the Reserve Bank does it often has to respond to bad Government economic policy, and it will say it is doing that, not in quite as blunt terms as that, but if you know, you understand monetary policy and you understand why the economic and fiscal policy, you will be able to report on that.

So it’s all a part of the accountability process in New Zealand. So that’s very very important.

But what has happened in the past few years is more and more coming into that lock-up being journalists from organisations who are interested in a quick shocking grab, they’re not there to do the analysis, they’re not there to absorb the contents of that document.

They want a shock horror, and they want to beat each other by nanoseconds.

And that’s what’s driven this action  here.

This was from an organisation that in no way provides in depth analysis of anything apart from maybe Kim Kardashian’s backside.

It’s completely, and what the Reserve Bank should have done, is first say ok MediaWorks, I mean this is obviously an organisational and cultural problem within MediaWorks, right, because this wasn’t, nobody at the news desk when this reporter contacted them said ‘whoa, what’s going on here’.

They simply said ‘ok, let’s start lining people up.

So this is not one reporter, right. And so MediaWorks would say ‘look, ban him for a couple of years’. No question about that.

But secondly they should have said, look ok, the risk is in these organisations that do not report the full flipping statement anyway, so keep them out until the press conference, which happens about five minutes after the embargo, and still have you know the analysts and the journalists in there who do do that analysis to do their job.

Andrew Paterson: So the question is should a relatively junior reporter with no background in business or economics, should have been in that situation in the first place.

Rob Hosking: Yeah exactly. And even if look you know sometimes people do go in there young, and look there have been very smart young reporters I might say, we’ve got one or two on NBR staff, but you know there are some wiser heads sitting on the news desk where if something like this does happen they firstly make sure it doesn’t cause any damage, and secondly they kick the young reporter’s backside.

Ah and none of this seems to have happened in this case. It just seems to have been you a, look frankly a contemptible lack of integrity all round.

“Do you think this also reflects in the case of MediaWorks, the fact that when you don’t train journalists appropriately, these accidents, these sorts of mistakes will happen?

Rob Hosking: That’s partly it. But again I come back to that contract, and a basic matter of integrity. You should not need any training as a journalist to know that when you agree to something you stick to that agreement.

That’s got nothing, I mean that’s not about being trained as a journalist, that is basic integrity.

Andrew Paterson: Now you’ve written to the Reserve Bank yourself?

Rob Hosking:Yeah I’ve suggested that they do something along the lines of what I’ve suggested and that they reconsider the decision. I’m not hopeful.

But I think that you know there needs to be some, if you want to see the quality of economic debate improve effectively,and you know there is a level of knowledgeable economic debate in the country that just wasn’t there  when I was growing up in the seventies when we desperately needed some I might add, then it should be reconsidered.

As I say I’m not hopeful, but we’ll have to wait and see.

Reserve Bank leak and MediaWorks

In March a journalist from MediaWorks leaked information about an OCR announcement that could potentially have resulted in insider trading, and another MediaWorks employee passed the information on to a blogger.

This was a serious breach.

Journalists had been brief on impending announcements so they cold prepare stories on the condition secrecy was maintained until the official announcement was made.

Yesterday the Reserve Bank issued this press release:

Reserve Bank takes action after investigation confirms leak

Thursday, 14 April 2016, 2:15 pm

Reserve Bank takes action after investigation confirms leak

An independent investigation has confirmed that highly sensitive and valuable market information on the March Official Cash Rate (OCR) cut decision was leaked by a journalist ahead of the official release, the Reserve Bank said today.

Following the investigation, the Bank will tighten its procedures for the release of confidential information. The Bank will discontinue embargoed lock-ups for news media and analysts ahead of announcements of interest rate decisions, Monetary Policy Statements and Financial Stability Reports.

The investigation by Deloitte’s forensic unit found that, contrary to the rules of the lock-up, information on the Bank’s decision to cut the OCR was transmitted by a Newshub Mediaworks reporter to several people in the Newshub office from the media lockup for the Monetary Policy Statement on 10 March.

This information was then passed on by another person in Newshub Mediaworks, well before the MPS official release, to an economics blogger. The blogger only alerted the Bank to the leak after the MPS was officially released.

Deloitte was assisted in its investigation by Mediaworks’ legal team, who undertook an internal investigation, uncovered emails that confirmed the leak, and reported these to Deloitte.

Governor Graeme Wheeler said: “The leak is a serious and disappointing breach of many years of trust. It created the opportunity for improper gain on financial markets and damage to the integrity of the Bank’s communications. I am extremely disappointed that the information was leaked initially and then communicated more widely.

“The fact that several people outside the Bank, who had access to the information improperly, failed to alert the Bank immediately, was irresponsible and left open a significant risk that the Bank could have closed down quickly with an immediate official release.”

No evidence has emerged that the leak gave rise to any financial market impact.

The Bank has considered alternative arrangements relating to information security. However, none completely mitigated the technology and human risks, said Head of Communications Mike Hannah.

“We have reviewed the procedures of several central banks. None provide lock-ups for analysts prior to major policy announcements, and the few that provide embargoed lock-ups for media representatives take extensive measures to control the media environment in the lock-up that are not viable for us. Most central banks do not provide embargoed lock-ups.”

Mr Hannah said that from the 28 April OCR statement release, the Bank will issue OCR and MPS statements via its pages on Thomson Reuters and Bloomberg screens at 9:00am, as is currently the case, followed by release on its website and to email subscribers. In the case of the quarterly MPSs and six-monthly FSRs, the release of a news release and these documents at9:00am will be followed an hour later by a press conference.

“The decision not to provide lock-ups for media or analysts means that these parties will receive the information at the same time as other financial market and public audiences.”

More information: Investigation into leak of March 2016 OCR announcement

MediaWorks issued their own press release:

MediaWorks Response to Reserve Bank Statement

Thursday, 14 April 2016, 2:07 pm

Mark Weldon, Group CEO, MediaWorks said: “MediaWorks unreservedly apologises to the Reserve Bank for this incident. Once MediaWorks was aware a leak had taken place, it conducted its own investigation to determine whether the leak had come from within MediaWorks and self-reported that to the Reserve Bank.”

Regarding the specifics of the matter, Richard Sutherland, Acting Chief News Officer, said: “The leak was caused by a failure within News to follow proper process and changes have already been made as a result. We are addressing the breach with those concerned and new policies and training will be implemented moving forward.”

There was a strong response on Twitter from journalists from other companies who were very annoyed their privilege of lock-up provide information in advance had been removed.

Some suggested that MediaWorks only should be penalised, which is a fair point.

Others said that much stronger action would be appropriate from MediaWorks, with sackings amongst the suggestions.

It was pointed out that if a Reserve Bank employee or politician had leaked information like this the media would be all over the story, they would have identified the people involved and named and shamed them.

Instead they muttered on Twitter where it was also suggested that they protect their own.

Except Rob Hosking from NBR who was scathing. See next post.


Little’s banking ballsup

Andrew Little is getting clobbered from all directions for suggesting he would ‘stiff-arm’ banks to get them to cut interest rates in line with OCR reductions, and if necessary legislate.

Radio NZ: Labour call on bank OCR cuts ‘dumb idea’ – English

Andrew Little says the government should pressure the major banks to reduce their mortgage interest rates, and if he was prime minister he could go as far as legislating to make them do so.

“I would start with pretty serious talking, you might say ‘stiff-arming’, and if they are not responsive to that, I guess you’ve got to look at your options when you are in government.

“You have the power to legislate, but I think you have got to have a pretty serious talk to the banks about expectations.”

Mr Little said if he did have to legislate he would do so reluctantly and with a heavy heart.

Responses have been scathing, with Little getting ridiculed in parliament by John Key.

And Bill English:

“I don’t think anyone in New Zealand wants the leader of the opposition setting interest rates, we tried that back in the 70s and 80s and it ends up with politicians always deciding to try and keep rates in a different place than they should be, so I think it’s a pretty dumb idea.”

Mr English said he was quite surprised by Mr Little’s comments.

“I mean the Labour Party in the past has always been fairly mainstream on economics, but now they are opposing trade, want the government to set interest rates, it’s headed in a fairly different direction, I think they’re just competing with the Greens.”

But even the Greens have declined to back political directives to banks, which is managed by the Reserve Bank with a separation from political interference.

Although there was no competition with the Greens on the matter, as the party’s finance spokesperson, Julie-Anne Genter was somewhat lukewarm on the idea of forcing banks to drop their rates.

Little didn’t say whether he would stiff-arm banks to raise interest rates if the OCR went up.

He has landed a balls up in his finance spokespersons lap, presuming Grant Robertson recognises the foolishness of Little’s remarks.

The only positive for Little is it is not election year.

OCR down, mortgage rates down

The Official Cash Rate was dropped to 2.5% yesterday to the lowest rate ever, down from 2.75%. It is thought that this will be as low as it goes.

Mortgage rates also dropped again. Kiwibank has the best floating rate, reported to be 5.65% (their website still shows it at 5.99%).

Westpac currently offers the best fixed term rate special, 4.24%  for 2 years.

NZ Herald reports: Now’s the time to fix your home-loan rate, says expert

Homeowners are being urged to fix their mortgages now to make the most of record-low interest rates – which experts say are at rock bottom.

BNZ director of retail and marketing Craig Herbison said homeowners stood to miss out on years of savings if they didn’t take advantage of the lower rates, which had likely reached their plateau.

Loan Market mortgage adviser Bruce Patten said further cuts to the cash rate were unlikely and now was the time to fix.

“The message from the Reserve Bank was, ‘Don’t expect a cut next year’. Our advice to people in the last few weeks has been, ‘If you want certainty, now is the right time to fix’.”

Rates are close to half what they were a few years ago.

Homeowners should be looking to fix their mortgages for two or three years, he said. Rates for those terms were between 4.2 and 4.5 per cent a year – a big saving for people who might have fixed for one year 12 months ago, when one-year rates were around 6 per cent.

A homeowner with a $400,000 mortgage taken over 30 years could potentially save $372 a month, or $4464 a year, by fixing at 4.5 per cent, compared to 6 per cent.

So a $200,000 mortgage over 30 years could save abour $180 per month, about $2200 per year.

This will help many homeowners, but will also benefit people in business.

Presumably some dairy farm owners will be getting mortgage payment relief from lowering interest rates that will in part at least offset the low dairy prices.