4  8  “Globalisation and Monetary Policy”, March 2007  BIS Review 25/2007  Figure 11: The change in the yield curve since the beginning of the tightening cycle  Source: Bloomberg  Figure 12: New Zealand and US long term interest rates  Source: Bloomberg  A negatively-sloped yield curve has encouraged borrowers to take out term loans at relatively lower rates.
Households in particular have favoured fixed rate mortgages, which now account for more than 80 percent of mortgage borrowing, and increasingly for longer terms. This has muted and delayed the impact of policy tightening in this cycle, although we have now seen the effective mortgage rate rise by around 110 basis points since its lows in late 2003.