A big gap has opened up between the market and the Reserve Bank of New Zealand’s views of where interest rates are heading.

The two-year swap rate - which can have a bearing on home mortgage rates - is now sitting on 5.21 percent, down from 5.78 percent earlier this year.

This goes against last week's hawkish vision regarding higher rates.

NZ Herald business editor at large Liam Dann explains why this is happening.

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