A cryptic paragraph at the end of governor Alan Bollard's statement is interpreted to mean the OCR, left yesterday at 2.5%, will have less impact on longer-term lending rates than in the past.
Instead, the OCR will be used to regulate inflation through influencing short-term interest rates.
Longer-term rates will be influenced more by the new liquidity rules for retail banks which must retain a sufficient portion of their total assets in the form of liquid assets to be able to meet the potential calls from savers to withdraw their money.
Retail banks will be forced to borrow more money from the domestic market, making competition for funds more likely.
The banks will also have to compete against interest rates offered by central and local government bonds, investments seen as a safe haven by risk-shy New Zealanders. Investors will be rewarded for putting their money in for longer terms.
That will see a return to the more traditional interest rate curve where short-term rates are lower than long-term rates.
Investors with available funds are likely to see interest rates climb for longer-term deposits, such as three-to-five year terms - terms also popular with homeowners wanting to fix their mortgages to have interest rate certainty.
Those homeowners will find themselves paying more for their mortgages as banks keep a margin between their borrowing and lending costs.
It is possible that New Zealanders will return to floating mortgages rather than fixed terms, where more than 80% of mortgages now lie.
The higher long-term mortgage interest rates will also encourage New Zealanders to continue paying off debt as quickly as possible, reducing the country's reliance on overseas funds.
