The only way is up

Indeed the outlook is pretty bleak. Recent economic data suggests there are a lot of inflation pressures around, which can only mean that the Reserve Bank will keep monetary policy tight and may even increase its official cash rate (and therefore mortgage rates) again when it makes its next announcement on December 6.

The past week have been reasonably quiet with few changes that was not the case a week earlier.

A rapid increase in wholesale funding costs forced lenders to raise their rates by some significant margins, in some cases as much as 30 basis points in one hit.

Normally at this time of the year banks make a lot of noise as they compete for business with Spring Campaigns.

This year has been very quiet, and banks are not offering the discounts off carded rates like they did six months ago.

But that doesn't mean to say there is no competition. There has been little outbreaks, most noticeably from Kiwibank and BNZ. For a while they kept two year rates well below their competitors, in return though it appears their margins, or profit, on this business have been very thin.

However the recent round of increases have forced these two players to lift their rates and move into line with their competitors. In some cases now BNZ is in the unusual position of having standard, fixed term rates higher than some of its competitors.

Currently standard, mainstreet banks, have their floating rates sitting at 10.55%, one-year rates range from BNZ's 9.49% to 9.70%. In the two-year fixed space BNZ is actually the highest at 9.49%, compared to other banks at 9.40%. It is offering 9.19% for three-year money versus the other banks at 9.20%. Five-year fixed rates are still the cheapest of all rates available, however they are not, by historical standards, good value. The banks range from 8.90% to 8.99% for this term.

Picking the best rate at the moment is hard, as nothing stands out as particularly attractive. The prevailing view from economists is that rate falls are at least a year away so going for two or three year fixed rates offers a reasonable compromise between price and flexibility. One bank though, has reported seeing some growing interest in floating rates on the assumption that it was not worth fixing at this point in the rate cycle.

The benefit of floating rates is that they will fall in line with the OCR when the Reserve Bank starts its cuts.