John Bolton is the founder of Squirrel Mortgages. Photo / Supplied
Mortgage holders biding their time waiting for rates to fall further are being warned the bulk of the decline is now behind us.
After cutting the Official Cash Rate to 3.75% last week, the Reserve Bank indicated further cuts are still to come this year, with the OCR expected to get to around 3% by the end of 2025.
But the founder and head of mortgages at Squirrel, John Bolton, told Nadine Higgins on The Prosperity Project podcast that people shouldn’t expect mortgage rates to mirror those cuts.
“The wholesale markets, which banks price off, have already factored this in. So, you know, we are seeing those two and three-year rates down now around 4.99%, but that’s already pricing in the future rate cuts.”
Shorter term rates, however, may still fall further.
“We’ve still got six-month fixed rates currently around 5.8%, although I’d expect those to drop to around 5.5% in the next week or so.”
Bolton says while one-year rates are likely to fall below 5% eventually, the potential payoff for continuing to float or fix short-term to benefit from further cuts may no longer stack up the same way.
“It wasn’t that long ago that people were paying, you know, 7% on their mortgage, so that was the right decision. (But) what you’re doing now is you’re paying more for what’s going to be only a small reduction in rates, and that doesn’t necessarily make as much sense”.
While banks are competing hard for business, Bolton says that, on some rates, there is less room to negotiate.
“That 4.99 rate that’s out there at the moment is very competitive, the banks are writing that at lower margins. So, it’s priced pretty tightly, so there’s not a lot of negotiation in that rate.”
Listen to the full episode of The Prosperity Project for more on what the OCR cuts means for you, and
The podcast is hosted by Nadine Higgins, an experienced broadcaster and a financial adviser at Enable Me.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts. New episodes are released every Monday.
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