ASB has reduced its three, four and five-year fixed interest rates to assist its customers who wanted more certainty in their home loan repayments in the longer term, bank retail products and strategy general manager Shaun Drylie said.
The special two-year fixed rate of 5.25% had ended and the two-year rate was now aligned to the 12-month and 18-month fixed lending rate of 5.45%.
The three-year rate goes down 0.15% to 5.75%, the four-year rate goes down 0.15% to 5.95% and the five-year term falls 0.25% to 6.25%.
Craigs Investment Partners broker Chris Timms said the ASB was not expecting much of a change when it came to the Official Cash Rate (OCR) which was at a current low of 2.5%.
Westpac chief economist Dominick Stephens said home loan fixed lending was likely to prove better value than floating over the next few years. Fixed-term rates out to two years were currently well below floating rates while three-year and longer fixed rates were only slightly higher.
''Staying on floating would only be the better option if the Reserve Bank actually cut the OCR. While that's a risk, our central view remains that the OCR will stay on hold for now and increase steadily from the second half of this year,'' he said.
Bank of New Zealand chief economist Tony Alexander believed the Reserve Bank would not raise the cash rate until next year but that fixed rates would rise as United States economic growth improved while worries grew about inflation and financing the US deficit.
Last week, the December inflation data showed inflation remained below 1% and had remained at 1% or below for three consecutive quarters.
The lower lending rates could place even more pressure on a heated property market, with prices and activity in Auckland and Christchurch already on the rise.
Mr Alexander predicted housing prices would rise this year, probably at a faster pace than last year because demand exceeded supply at current prices.
''The housing affordability debate will grow and the crisis for low income earners in Auckland, particularly, will worsen.''
Investor interest would spread out of Auckland while some home owners would cash up and shift to more affordable areas with cash freed up for retirement spending, he said.
Mr Alexander anticipated that soon, fixed rates would be rising.
''If my strategy had been to stay floating as long as possible before fixing then I would start hunting around for a good fixed rate.''
The difference between fixing long term and floating was still large and predictions in recent years of fixed rates rising had been wrong many times. Mr Alexander wanted to see rates rising before moving in and fixing with a bank which was not first to move. Until then, he would sit floating or fix for one year and focus on maximising repayments.
Mr Timms expected interest rates to remain low into next year and that fixed-interest investors would be disappointed when their term deposits or bonds came due this year.
In 2008, investors could get an 8% return on money on call but with the new regime now in place regarding how much money banks had to hold from the domestic market, interest rates were expected to flatten.
''We expect the call rate to be under 6%, maybe 5.5%. People thinking the call rates will get back to 8% are dreaming.''
In 2008, the BNZ was offering bonds at 8.56%, Government-owned Mighty River Power had bonds on offer at 8.36% and the Tauranga City Council had bonds at 7.05%.
When those bonds came due during this year, investors would get paid out rather than the bonds rolling over. The institutions could issue more bonds but they were likely to be at around half the interest rates offered in 2008, Mr Timms said.
Investors looking around for returns as interest rates remained low would find the mid-tier investments, such as investment companies, had disappeared. That left them with the NZX where they could get 6.5% to 7% return for the risk.
''The longer interest rates remain flat, the higher the NZX will go,'' Mr Timms said.