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When it comes to finding the right home loan rate, it's time for borrowers to pick a strategy, one economist says.
ASB senior economist Chris Tennent-Brown said fixed terms of two years or more were not likely to get much cheaper.
He said one and two year rates were now up to 2.5 percent below where they were at the peak.
While the official cash rate will probably continue to drop through 2025, he said the Reserve Bank was nearing the end of the easing cycle.
Floating rates were likely to be lower in the short and long term, he said, as were six-month rates.
But one-year rates were likely to be flat or lower in the short term and flat longer-term.
Rates for two, three and five years were likely to be flat in the short term but could be higher in the longer term.
He said, for some time, people would have been better off to fix than to float while they waited for rates to drop.
ASB was charging a floating rate of 6.64 percent.
"This is the tricky trade-off now," Tennent-Brown said. "Short-term rates are definitely under the force of a lower OCR. In that two to five-year space there's two forces, one is the increase in global rates and the price for volatility we're seeing in the markets.
"The other is how low the Reserve Bank will go and how long they will keep it low. Right here, right now markets aren't pricing in lots of wriggle room for significantly cheaper two- to five-year rates. That could change but based on where we're at today, I think the movements will be in the short-term rates."
He said for a while now people would have been better to have fixed and lowered their rates rather than floating.
"I think people need to pick a strategy. I've been thinking that and saying that for a while. Floating and trying to pick the bottom comes with a cost.," he said.
He said a strategy of picking the cheapest rate each time a loan came up to refix had proven to be the least expensive option over time.
"Given people have been able to fix for 4.99 percent for a while now, people have paid a price to hopefully get lower than that.
"Some of the shorter terms could get lower but when I look at the mix of forces right now for the longer terms, it's tricky to know whether the downward force will carry on for the longer-term rates, for people to be able to get 4.99 percent for a longer term or likewise whether they're able to get a rate cheap enough to warrant paying the high six-month or floating rates.
"It's not all about trying to time things to fix at the lowest fixed rate. Borrowers need to balance their needs for flexibility, repayment timeframes, the cost of floating vs. fixing, and other personal needs whilst trying to minimise the cost of borrowing over the entire period of a loan."
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