Bank economists predict low interest rates to go lower in 2021
Economists all agree: OCR is heading negative
At the time of writing, economists from all of the Big Four banks (Westpac, ANZ, ASB, and BNZ) have declared their expectations of a negative OCR over the next year or two.
Westpac, who was the first to formally declare their predictions, initially predicted that this drop would be in November of this year. However, they revised their prediction to early 2021 when the Reserve Bank itself requested that the banks would need to be operationally ready for a negative OCR by December of this year.
The other banks changed their predictions shortly afterwards – after all, if the people in charge of the OCR are making sure the banks are ready for negatives, that’s a pretty strong indicator it has a good chance of happening!
What does this mean for borrowers?
As the Official Cash Rate reaches subzero temperatures, it’ll likely drag bank lending rates with them, allowing borrowers to benefit from the lowest lending rates in history.
However, before you get too excited, ANZ chief economist Sharon Zollner explains that a negative OCR won’t suddenly mean we’re in opposite world, where the banks pay you to borrow.
“A negative interest rate would be a wholesale rate – it’s very, very unlikely anyone going along to the bank for a mortgage would get paid to borrow money – just as it’s unlikely you would have to pay to put money in the bank,” she explained in an August AM Show interview.
“It’s probably best thought of as an incredibly low interest rate. It would definitely have a downward impact on mortgage rates and other borrowing rates.”