What will OCR surprise mean for home loan rates?

A Reserve Bank decision to hold the official cash rate could be good news for home loan borrowers.It had been widely predicted that the OCR would increase on Wednesday as the bank leans against inflation pressure from higher fuel prices.But the monetary policy committee decided, by vote, to hold the rate at 2.75 percent. Three of the seven members voted for an increase.Westpac chief economist Kelly Eckhold said the one-year swap rate was already down 20 basis points, which implied some downward pressure on mortgage rates if it was sustained.Eckhold told Checkpoint, the decision had been a big surprise for the market, as it had this almost 100 percent priced in."I thought there was probably about a 60 percent chance it'd hike."Eckhold said holding the OCR was the right decision.He believed inflation could be back to 2 percent later next year, but it wouldn't get down there by itself.Infometrics chief forecaster Gareth Kiernan agreed home loan rates could come down.Infometrics chief forecaster Gareth Kiernan. (File photo)RNZ / Rebekah Parsons-King"Firstly, the fact that an increase today was about 90 percent priced in suggests there could be some easing in shorter-term mortgage rates, particularly for six months and, to a lesser extent, one year."Secondly, market pricing for future meetings is also likely to be less hawkish given the bank's failure to tighten today and the relatively dovish statement with a lot of emphasis on the global risks."If market pricing for the OCR shifts down by 25 points consistently for the next year, then that could be expected to show up in rates for one year and longer with the effects likely to be proportionately bigger for the shorter rates, one or two years."But Cotality chief property economist Kelvin Davidson said he expected more official cash rate rises were still coming and that would keep upward pressure on home loan rates."It wouldn't be a surprise to see more borrowers continue shifting towards longer-term fixed mortgage rates as insurance against even higher costs later. "Simplicity chief economist Shamubeel Eaqub said there could be some slight relief but the movement would be small."Borrowers should carefully consider their ability to absorb higher mortgage rates in the future - the risk of higher rates is still very real. It could be driven by more OCR increases by the RBNZ, and also rising bond yields globally."Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make and spend money