Mortgage rates may just have another thirty or forty foundation factors to fall even if the Reserve Bank does reduce the Official Cash Rate to minus 0.5 per cent next year, Westpac says.

The savings account is now forecasting the Reserve Bank will slash the OCR by 75bp in April.

The main savings account has signalled it may build a phrase lending facility that costs less than that it will lend money to banks during very low prices to encourage these to successfully pass on the gain of upcoming OCR slices to borrowers.

Reserve Bank assistant governor Christian Hawkesby has mentioned these types of a facility could possibly offer banks more assurance to smaller catch phrase deposit prices.

But Westpac senior economist Michael Gordon believed such a facility would have only a marginal impact on mortgage rates.

About a third of savings account build up at present earned zero interest as well as near that, Westpac believed within a bulletin.

Gordon claimed he didn’t believe the banks would will not allow customers deposit cash or would begin paying negative deposit prices on mainstream accounts, even when the OCR did go less than zero.

There is a tough core of bank financial support in which you cannot logically take the price tag of it below zero.

That meant banks’ financial backing rates could not fall a lot of even more still if they had been offered by way of a new cheap source of money from the core bank account.

Having to take the OCR listed below zero would work within much the very same way like a conventional’ OCR slice.

Nonetheless, we don’t count on that it would shift via to retail rates one-for-one, Westpac claimed.

The reduced the OCR went, the less additional impact that would have on retail lending fees, it stated.

We calculate that an OCR cut right from 0.25 per cent to 0.5 per cent would most likely decrease mortgage rates by just aproximatelly 30-40 foundation areas.

OCR slices listed below approximately -1 per cent will not have any effect whatsoever, it said.

Gordon did not principle out some mortgage prices slipping below two a cent.

Though he also cautioned several of the expected advantages associated with a negative OCR had already been expected as well as taught to clients, given there’s currently an opinion which was the spot that the OCR was proceeding.