More of the same is probably the best way to sum up developments in the home loan market over the past week.
This is not to say that there has not been movement; there has been plenty, and most of it in the right direction for hard-pressed mortgage borrowers.
Non-bank lenders have followed the major banks in cutting fixed rates more-or-less across their books by as much as 55 basis points (in the case of Global Home Loans with its 2 year rate). As noted by the mortgage rate graph published by Good Returns earlier this week, measuring general trends in the market, rates have fallen sharply over the past three weeks. Much of the impetus has come from the last statement on interest rates by the Reserve Bank, pointing to the probability of a cut in the official rate before the end of the year. This sent the cost of wholesale funds tumbling.
The expectation among economists polled by Good Returns is that home loan rates will continue to fall over the next year to 18 months.
Borrowers have something to look forward to after months of increases but it is not going all their way yet. ANZ points out in its latest Property Focus report that many of those who are refinancing at present are doing so from rates of 8%, yet most fixed rates are at 9% or more.
Only by fixing over 5 years can you obtain a rate at less than 9% and even then, only from a few lenders. Advisers and economists see 5 year rates as still being too expensive at a time when rates generally are falling.
There is also uncertainty how whether the momentum for falling rates will be maintained. ANZ points out that central banks overseas are more likely to start increasing rates now than decreasing them as they try to control inflation. Borrowing costs are also influenced by the supply of credit and this is still tight.
These factors mean that borrowers are taking a risk in fixing for less than a year; a 1 year term is generally thought the safer bet in a market where you still need to expect the unexpected.