Photo: RNZ
Borrowers fixing a home loan currently have to weigh up whether it is worth paying roughly half a percent more for a short-term fix.
On Monday, ASB said it was cutting most of its fixed home loan rates by 20 basis points.
Its one-year rate drops to 5.79 percent, its 18-month to 5.59 percent and its two-year to 5.49 percent.
The six-month rate is 6.19 percent.
That means someone who fixed for six months with a home loan of $500,000 over 30 years might pay $706 a week, compared to $650 a week if they fixed for two years.
But six-month fixes have been popular lately, because of expectations that interest rates will continue to fall.
ASB senior economist Chris Tennent-Brown said his forecasts indicated that some fixed-term rates could still be lower next year.
But he said the strategy of fixing for shorter terms recently had come at the cost of missing out on some of the lower one- and two-year rates available recently.
"And with the Reserve Bank now on hold until the next meeting in February, it's a good time for people to weigh up the pros and cons of this week's rate reductions and pick a strategy that suits them in terms of flexibility, and rates.
"Waiting to time the bottom next year appears expensive when we consider the gap between the floating and shortest fixed rates vs. the 12-,18-, and 24-month rates.
"It's also worth thinking about the volatility in global interest rates, and in NZ wholesale markets. The associated minor increases in the longest fixed terms recently highlights that it isn't a one-way street for the rates outlook. There will be a mixture of forces on mortgages next year, and not all of them are down."
Squirrel chief executive David Cunningham said people were still generally choosing a six-month term, or in some cases, 12.
He said floating was now not popular because it is three months until the next official cash rate (OCR) review.
Cunningham said he expected one-year rates to be below 5 percent by the middle of next year.
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