Mortgage borrowing strategy

We expect short-term mortgage rates to remain biased lower over the months ahead.

Despite Reserve Bank governor Alan Bollard warning that the OCR would remain at or below current levels until late 2010, wholesale markets continue to price in rising interest rates.  This tension, and intertwined with high deposit rates, could take some time to resolve and is expected to keep the yield curve steepening.

In this environment we favour being patient, taking advantage of low six month and 1 year fixed rates. Our view Mortgage rates have been stable over the past month, having already risen during the month of March.

As we highlighted previously, that rise occurred following a widespread rush to fix by homeowners, which placed upward pressure on wholesale rates, which in turn placed further pressure on mortgage rates, and so on.