Differing views on timing of next interest rate hike

Differing views on timing of next interest rate hike

One thing economists agree on is that the Reserve Bank will not be increasing the official cash rate on Thursday.

Currently the OCR is sitting at 2.50% and the central bank has warned that it will start increasing it sooner than previously expected.

The latest www.mortgagerates.co.nz survey of economists shows that eight out of 13 experts are predicting the next increase will be in December. Three of those eight are forecasting a 25 basis point hike to 2.75% however the reminder are opting for a 50 basis point hike.

Two economists though are predicting that the OCR will rise when the Reserve Bank releases its announcement in October.

The remaining three are suggesting increases won't be until the first quarter of 2012.

"The wide variation in predictions, including the size and timing of the next OCR increase, shows that there is still a lot of uncertainly in the market," Mortgagerates.co.nz publisher Philip Macalister says.

"One thing that is certain is that as soon as the OCR increases floating rates will rise."

Mortgagerates.co.nz, which is the only site in New Zealand where borrowers can sort and compare home loan rates, shows that the lowest standard floating rate at the moment is 5.60% from the Public Trust. SBS and its subsidiary HBS Bank are close behind offering 5.65%.

BNZ and Kiwibank offer 5.50% and 5.59% respectively for their offset mortgages, while Westpac has chosen to lead with its revolving credit mortgage, Choices Everday, at 5.60% while its standard floating rate is 6.24%.

Although we have officially entered into spring, banks have yet to roll out their traditional spring home loan campaigns.

Banks haven't run high profile campaigns in the past couple of years because of the global financial crisis and the slow housing market, however Mr Macalister predicts there will be more action this year than in recent years.

"The housing market passed the bottom of the cycle and there is a growing amount of activity," he says.

ENDS

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