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RBNZ Rate Cut Watch: what a 50 Basis Point Drop Could Mean for Your Mortgage
The Reserve Bank could cut the Official Cash Rate by 50 basis points this week – but what woudl that mean for home loan rates?
The bank will review the official cash rate on wednesday.
Several economists and othre commentators have called for a drop of 50 basis points, which would take it to 2.5%.
Infometrics chief forecaster Gareth Kiernan was among those expecting a 50 basis point cut.
That could mean that home loan rates dropped a bit.
“Last time I looked, the market was pricing in a 60% to 70% chance of a 50 basis point cut so I would expect to see rates across the board respond to it to some degree,” he said.
A cut of 50 basis points would also imply another cut in November, he said.
“It would be weird for them to do 50 and then stop… so that would add to the downward pressure, too.”
For some time, commentators have been saying home loan rates are probably almost as low as thay will go.
Whether that was the case would depend on what happened to the economy, Kiernan said.
There was starting to be some softness in dairy and horticulture prices, which could mean the recovery next year was not as strong as previously hoped, he said.
“Having said that, we’re also nervous that the Reserve Bank could well be overdoing it now and then need to raise rates by late 2026.
“The evidence suggests we are close to the bottom [of home loan rates] but there is still a lot of uncertainty out there.”
Westpac chief economist Kelly eckhold said he was also expecting a 50 basis point cut.
One-year rates had already moved down in the past week, to about 4.49% at most banks he noted.
“Wholesale rates probably will fall a bit further because the full chance of a 50 point cut isn’t priced in so there’s some
