Competition keeps rates down

For those borrowing on longer terms (three years or more) there has been a continuing reduction in rates over the past week. In fact the majority of the trading banks have reduced their three, four and five year fixed rates and some falls have been by as much as 30 basis points.

Major trading banks to move in the past week include ANZ, ASB, BNZ and Westpac.

For those borrowing on shorter terms, two years or less, the focus of attention is on the Reserve Bank’s review of its official cash rate on Thursday.

The consensus view from economists is that the bank will keep the OCR at its current level of 6.75%. This is despite warnings from the Reserve Bank governor Alan Bollard that rates could rise.

The growing expectation is premised on recent economic data, which suggests that the central bank has inflation under control and the economy is slowing as the bank wants.

Assuming the economists are correct it is unlikely that floating, six month and one year rates will move much in the foreseeable future.

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