"The kind of panic that has swept through the market over the past week isn't healthy - for the public as a whole or for policy makers," ANZ-National Bank chief economist Cameron Bagrie said yesterday.
Recent events reinforced the bank's view that the Reserve Bank needed to be clear in its guidance over the future path for policy, particularly in how long rates were expected to remain low.
Previous policy action - when rate hikes started fairly quickly following the end of the easing cycle - was partly responsible for what was happening in terms of the mad rush to fix rates, he said.
The Reserve Bank needed to stem the panic if it sought more policy traction.
As an economist, Mr Bagrie said he would not normally be drawn to comment on the cut and thrust of daily market moves and would not dwell on them like a trader might.
However, he found it hard to stay silent in the wake of last week's moves across the swaps market which he described as the clearest example of a market gripped by panic he had seen in years.
On one day alone last week, the bellwether two-year swap rate moved up 0.4% only to retreat almost all the way back by the end of the day.
"If that's not panic, we wonder what is.
"The rising in wholesale interest rates and resultant rise in mortgage rates certainly has a lot of people talking and asking questions."
The rise in the two to five-year fixed mortgage rates and the wholesale rates indicated there was further pressure on mortgage rates to move up if left unchecked, he said.
The reasons for the movements were wide and varied but included. -Rising deposit rates had increased the domestic funding costs of financial intermediaries.
There was a lack of liquidity at times in the New Zealand rates market.
The collective desire as a nation to beat the market had shifted into overdrive.
Higher rates encouraged a greater incentive to fix for fear of missing the boat.
The mentality of borrowers remained "old school" and there was a deep desire for the certainty of fixed.
People had been slow to embrace the possibility, which was reality elsewhere, that floating rate borrowing would cost less over the long term.
Stiffer competition in the fixed mortgage market, relative to floating, has kept fixed margins lower, increasing the attractiveness of fixed.
"On top of the list, we have a deep suspicion that the frenzy that has developed is also symptomatic of burgeoning household stress.
"In such circumstances, even small changes can become relevant."
Cash-strapped households were looking at all possible avenues to free up some cashflow, Mr Bagrie said.
Going to a fixed rate when it offered a small advantage over floating rates was one way to do that.
Having certainty over mortgage payments was another added attraction.
Few households would have the stomach to stand by and watch fixed rates move higher.
