Interest Rates

[Hound]

Seem to recall the last boom, when Dr Bollard was putting rates up. People knew they would continue going up, so more kept piling into the market.

[speights boy]

Money is starting to flow from Bonds to Equities.
Interbank swap rates short and long term are trending higher.
Prices of perpetual debt issues which reset their interest rates every year based on the swap rates are trending higher.
My guess.....higher fixed rates this year.

[NovInvestor]

Until bubble goes "POP"

I will stop buying wayyyy before the pop lol.

[NovInvestor]

Money is starting to flow from Bonds to Equities.
Interbank swap rates short and long term are trending higher.
Prices of perpetual debt issues which reset their interest rates every year based on the swap rates are trending higher.
My guess.....higher fixed rates this year.

Hence I will fix the majority of my mortgages to 2 years middle this year.

[Wayne]

I will stop buying wayyyy before the pop lol.

coul you let us know when that will be?

[Davo36]

Exactly what I thought.

Novice guy (going by his name, no offense intended) knows when to stop buying... hmmmm.

[drelly]

Hence I will fix the majority of my mortgages to 2 years middle this year.

Why two years? Why not 5 years? If rates do start to rise, 2 years later, you might be staring at much higher inflation.

[McDuck]

The OCR speech today was pretty bland.

Didn’t stop NZ Dollar speculators from trying to squeeze some hint of a meaning out of every single word.

The bit that made me laugh was how the warning on the housing sector was interpreted as “hawkish”.

Following in from that, there was a slight increase in demand for the NZ Dollar.

The flaw in the reasoning process being that there are several possible solutions where the housing market is bought under control by means other than increasing the OCR.

[speights boy]

The OCR speech today was pretty bland.

I disagree.
Moderately cautionary would be my terminology.
So, I guess I'm one of the hawks that make you laugh.

You seem to compare the thought process of currency traders and their short term horizon, with that of longer term control of credit flowing into the housing market.
I must admit; I am long past trying to predict or understand the former.

[SwissKiwi]

Seem to recall the last boom, when Dr Bollard was putting rates up. People knew they would continue going up, so more kept piling into the market.

Yes it did take a lot of tightening before people took any notice at all last time - the momentum was so strong.

Are you suggesting that when the market expects imminent rate increases there is a period of people piling in to buy and fix a reasonable rate before they head too high? If was the case then rate increases would perversely actually stoke the market even more for a time.

[Perry]

RBNZ's Next Move Is Up, But When?
James Weir
31/01/2013

Reserve Bank worries about rising house prices is a clear sign that
the next move for official interest rates is up, economists said today.
Some predict the rise will come later this year, while others believe
the first rise won't come until December, or perhaps March 2014, given
the low levels of inflation.

Reserve Bank Governor Graeme Wheeler this morning held official
interest rates at 2.5 per cent, but took a tougher line on the housing
market and said the currency was over-valued. Wheeler pointed out that
house-price inflation had increased, and said the central bank was
keeping a close eye on that, as well as household credit growth. "The
Bank does not want to see financial stability or inflation risks
accentuated by housing demand getting too far ahead of supply,"
he said.

Now, I'm sure some erudite PT Forumite can explain the conundrum to us all:

If the OCR goes up, lots of hot o'seas money will flow here from nations
where interest rates are low or zero. The effect of that being?
(On the RBNZ and inflation and the housing market and exports and . . . )

"housing demand getting too far ahead of supply." Does he know about
the state of Christchurch and Auckland and Councils holding the country
to ransom? Or are Graeme's wheels just spinning in an econo-babblers
quagmire? Everything - but everything that central and local gummint
does, and is doing, is increasing the cost of housing. Demand may be one
factor pushing up prices, but scarcity, and costs being pushed up by all
the two-faced red tape creating wallahs who then indulge in pious hand-
wringing over the price of housing is likely the main driver. And all the
while, the cant goes on: it's greedy PIs to blame.

Somehow, it's always someone else's fault. Of course!

[speights boy]

My guess Perry, is that Mr Wheeler's mandate is monetary policy not economic policy.

[Hound]

I think the best way to slow things down is to induce a credit squeeze. Keep the rates low or drop them a bit. As Perry suggests there would be less money being dumped here for the higher rates, might dry up some the funding. Put an end to 95% lending bs.

[McDuck]

I disagree.
Moderately cautionary would be my terminology.
So, I guess I'm one of the hawks that make you laugh.

You seem to compare the thought process of currency traders and their short term horizon, with that of longer term control of credit flowing into the housing market.
I must admit; I am long past trying to predict or understand the former.

lol
"the thought process of currency traders".
I'm not sure it meets the bar.

[NovInvestor]

If NZD is pushed lower, a lot more funds from overseas property investors will flow to Auckland lol!