It has been a crazy few months when it comes to interest rate movements. Below we try to make a little sense of the madness and where we might go from here.

So far this year we have seen some rates drop and some excellent special rates offered by a number of lenders. The current best specials available with the major banks are below.

1 year - 5.10%
2 years - 5.39%
3 years - 5.39%
5 years - 5.65%

The key thing to know about these specials is that not everyone is eligible for them and that we might still be able to negotiate a further discount off these rates for you.

The herald ran an article a couple of weeks ago trumpeting rate drops by Kiwibank and ANZ but these were drops from their "standard rates" which are well above the specials they and other banks are offering. If you're paying a standard rate then you're paying too much!

What we have seen in the past couple of weeks is bigger discounts being offered to good customers. We make sure we put your best foot forward so that you have access to the best deals possible and this makes a big difference when negotiating interest rates. We're getting good discounts off those special rates for good customers. 

We still get people trying to say they were offered 4.5% fixed for 5 years and the banks generally laugh this off. It's important to have a good understanding of what discounts are available and to be realistic. Because we're doing this for tens of loans a week we know just how far the banks will go.

The reason for the softening in rates is that there is a strong feeling that the Reserve Bank will drop the Official Cash Rate further. In fact rumours are that most banks have already factored in at least one drop in the Official Cash Rate this year with their current pricing for the short term interest rates. If there is more than one then we could see further rate drops.

Will interest rates really drop? Our opinion is that we are unlikely to see any substantial interest rate decreases for the medium/long term fixed rates that most people have. This would require more than one drop in the Official Cash Rate and cheaper funding from offshore for the banks and most economists don't see this likely to get any lower.

Will interest rates increase? They certainly will. It's just a case of when they will increase. Most aren't picking a strong enough economic recovery for the Reserve Bank to increase the Official Cash Rate for another 12 months but this hasn't stopped rates increasing in the past. If overseas borrowing costs increased or the currency moved the wrong way we could see fixed rates increasing.

Our advice is always to fix for the right term to suit your personal situation but at the moment we'd definitely be recommending the 3 and 5 year fixed rates for either side of 5.50%. Just get in touch with us and we'll make sure you're getting the best rate possible.

We'll keep you updated with any rate changes on our facebook page.