Mortgage rates fall by 1.2% in 18 months: ASB

ASB's latest Home Loan Rate Report says fixed interest markets and bank funding costs, as well as Reserve Bank OCR cuts, have contributed to current record lows in the market.

ASB economists say "downward" overseas influence on mortgage rates will continue over the coming months. The report states wholesale rates are currently "hovering around record lows". 

The bank says fixed and floating rate mortgages will remain "very low through 2019 and 2020", but adds a note of caution: "But we stress there are a number of forces at play, and we don’t expect mortgages to move in lock-step with any future OCR moves."

The report added: "We think it is prudent for borrowers carrying debt for longer than the next couple of years to budget on higher mortgage interest rates in the longer term. However, we expect mortgage interest rates to eventually settle at levels that remain below long-run averages of the past 20 years."

ASB believes the "big moves down have already occurred" on longer-term rates: "We don’t expect to see major drops in the longer-term mortgage rates based on our latest forecasts," the report said.

The Reserve Bank's Financial Stability Report, due in November, is set to make a call on the future of LVR speed limits. ASB economists say the limits could be changed next month.

"LVR restrictions will eventually be changed. The tool was not designed to be permanent. The RBNZ has made relaxing the LVR restrictions conditional on whether credit and house price growth remains low and if banks continue to maintain prudent lending standards. Watch this space over the coming months."