Fixed rate changes slowed down markedly over the last week as the Reserve Bank of New Zealand’s monetary policy review nears.
Financial market players are anticipating a 25-basis-point rise in the official cash rate on Thursday and some economists are even predicting a 50-basis-point hike.
RBNZ Governor Alan Bollard’s rhetoric will be closely analysed for hints on what lies ahead. Will there be even more tightening?
The forecast rate rise will quickly flow on into floating mortgage rates and further increases in fixed rates will not be surprising, depending on what the market believes will be on the cards for the December monetary policy statement.
“We expect that the RBNZ will deliver a 25-basis-point increase on Thursday. This may not be sufficient to satisfy the RBNZ that it has pushed the inflation genie back into the bottle and the odds for a subsequent hike in December are roughly even,” Westpac chief economist Brendan O’Donovan said.
“The RBNZ has been talking tough for some time and there would be a strong element of ‘the boy who cried wolf’ if they don’t deliver this week,” he said.
Swap rates at which banks borrow to fund fixed loans crept a little higher last week due to the belief that there will probably be another rate rise come December 8 and even more quashing of expectations that rates are going to be cut next year.
On the chance of a 50-basis-point rise on Thursday, BNZ chief economist Tony Alexander thought 25 basis points was more likely, but said: “The RBNZ may feel the time has been reached where the risks of inflation getting cemented in above 3% are so great they need to shock New Zealand households.”
In the mortgage market over the week, few lenders announced changes and some more quiet days can be expected ahead of Thursday’s rate announcement.
One-year rates still range from the 7.60% offered by Southern Cross to 8.80% from GEM Home Loans.
In the two-year market, TSB cut its rate 10 basis points to 7.50%. It now offers the most attractive rate and the two-year rates vary up to Headstart’s 8.75%.
Three-year rates range from the 7.55% offered by Loan Plan to Headstart’s 8.55%, while four-year rates still vary from 7.5% at Loan Plan and Public Trust to 8.15% at New Zealand Mortgage Funds.
In the five-year loans, a group of lenders still offer the lowest rate of 7.4% – ASB, BankDirect, Housing Corporation, Loan Plan and Kiwibank.
The five-year rates rise to Gem Home Loans’ 8.3%.
In other news, National Bank is now offering a 21-month rate of 7.85%.
To compare home loan rates go to http://www.goodreturns.co.nz/section/200.html
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