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Borrowers and people looking to refinance are facing some tough decisions.

The flurry of home loan rate changes slowed down at the end of last week and this week. Often many of the leading changes are made late on Friday or Monday of the week, but that hasn’t been the case this time around.

Bank of New Zealand, which tends to trigger changes, only made one alteration and that was to drop its five-year rate on Monday.

Part of the reason for the quietness is that the wholesale interest rate markets have steadied considerably.

One question worth pondering is what really is going to happen to the New Zealand economy over the balance of the year. The interest rate markets are saying it is going to get weaker and that the Reserve Bank will be forced to ease its official cash rate earlier and more quickly than the bank’s governor Alan Bollard has signaled.

This creates a couple of options – hang out a little longer and hope that home loan rates fall some more, or go for a short term (eg: six-months) then refinance again.

However, the equity market is telling a very different story. It is at record highs and, taking the notion that the sharemarket is a barometer for the economy, then it is much stronger than interest rate markets suggest.

This means that the RBNZ will do as it says and keep its OCR up until next year.

Adding to the questions is where are longer-term fixed rates heading. As regular readers of the Weekly Home Loan report will know, these rates are set off what is happening in the United States.

As economic growth picks up in that market, its central bank, the Federal Reserve, will increase rates leading to higher home loan rates in New Zealand.

A likely upshot is that interest rates across the board in New Zealand will stop moving in the same direction together. It is quite possible that long term rates will rise and short term ones will fall.

In the meantime though rates have fallen over the past three months. Short term rates are slightly above their five-year average, while three, four and five year rates are below the average.

Currently six-month rates start at 7.99% and go all the way up to 9.00%, however the second highest rate, AXA’s, is 8.50%. The choice of provider in this term is much smaller than other terms as only around half the market offer six-month rates.

One year rates are in a very similar range to six-month rates, again starting at 7.99%.

In the two-year term the lowest rate on offer is 7.50% from Mortgage Finance, Kiwibank and Bank of New Zealand. The other big banks are sitting at the 7.70-7.75% mark.

Three-year rates have the lowest starting point in the market, being 7.30% from Mortgage Finance and Kiwibank. BNZ, which has pitched itself as the lowest big bank, is 20 basis points higher at 7.50%.

In the five-year term Bank Direct is the lowest with a rate of 7.40%.

It is worth noting that Westpac, which for the past year or so has consistently had the highest rates of any of the big banks is now matching its competitors, or even beating them. Whether this is a change in tactic or just a matter of timing will become clear over time.

To compare mortgage rates visit the Good Returns Mortgage Centre.