Over the last month or so, many of the banks have bumped their 1-year rate from around 4.49% to 4.59%.

But what people won't see is that most are discounting that rate back down to an average of 4.48%.

So the interest rate you see on bus backs and billboards has gone up. But most Kiwis aren’t paying any more on that rate. 

We also see this with the 2-year rate. The average bank is discounting this rate by 0.16%. 

It’s true. Rates have gone up. But if you just look at the advertised rates, you'd think they've gone up more than they actually have.

Why do banks do this?

Banks are worried about the war in Iran. And they are seeing their costs go up. 

But they're still competing hard for business. So they're discounting behind the scenes.

The sticker price goes up. But, some of the negotiated prices stay roughly the same.

That’s really hard to see from the outside.

Where could mortgage interest rates go from here?

Today, Iran and the United States agreed to a 2-week ceasefire. That’s already pushed the price of oil below US$100 a barrel.

That matters for New Zealand because oil prices feed directly into inflation.

The Reserve Bank expects headline inflation to rise to 4.2% by June this year. (Just announced today). That's outside their 1–3% target band. 

But in today’s speech, the Reserve Bank Governor, Dr Anna Breman, said that that number alone won't necessarily trigger an OCR increase.

What they're watching is core inflation – the underlying trend once you strip out the volatile stuff like fuel and food prices.

So if the ceasefire holds and oil prices stay low, inflation pressures ease. That takes pressure off the Reserve Bank to hike the OCR. 

And mortgage rates stay where they are.

If the ceasefire falls apart and oil spikes again, we're looking at more inflation. That could force the Reserve Bank's hand. And mortgage rates would likely rise.