Interest Rates

[muppet]

Floating mortgage rates seen at 6% later this year
Floating mortgage rates are strongly expected to reach 6% in 2011, according to local prediction market iPredict.
The Victoria University-owned market indicates there is an 87% probability that average floating-rate mortgages will reach 6% by the end of this year. This number is up from an 84% probability last week.
The probability that they will reach 6.5% in 2011 has also risen since last week, from 20 to 25%.
The market also expects Reserve Bank Governor Alan Bollard to increase the official cash rate (OCR) earlier and more frequently than previously indicated.
But while this is expected to affect mortgage rates, other economic indicators have broadly remained the same.
The OCR is predicted to remain at 2.50% until September when there will be an increase to 2.75%.
It will remain at 2.75% through to December 2011, when it is expected to rise to 3 %, rising to 3.25% in March 2012, and then to 3.50% in April 2012.

More at
http://www.nbr.co.nz/article/floatin...-year-cw-97677

[muppet]

ASB has increased rates over a wide range of terms.
1yr 6.15%
2yr 6.55%
3yr 6.95%
4yr 7.35%
5yr 7.95%

[muppet]

ASB cuts fixed interest rates

FIONA ROTHERHAM Last updated 17:22 08/08/2011


ASB has moved to reduce its home loan fixed interest rates after increasing them less than a week ago.
The new rates, effective from tomorrow, include a 0.25 per cent drop in the one-year rate to 5.9 per cent per annum, a .30 per cent reduction in the 18 month rate to 6.1 per cent, and a 0.35 per cent reduction in the two-year fixed housing rate to 6.3 per cent per annum.
The move follows changes in the wholesale funding market.
Just last Wednesday ASB, Bank Direct and Sovereign upped their home loan rates across the market - the first real movement in home loan rate for many months. They followed the Reserve Bank's announcement on the OCR where it indicated a likely reversal in the 50 basis points cut it made in March after the Christchurch earthquakes.

http://www.stuff.co.nz/business/money/5409908/ASB-cuts-fixed-interest-rates

[JABlog]

I am constantly amazed by the so called economists who keep giving conflicting views on a daily basis.
The main stream banks main interest is to generate revenue, Fixed Interest rates are money in the bag for them so they have a vested interest (excuse the pun here) in them.
As for predicting Interest rates judging that almost all economists mainstream banks and non banks alike all have being wrong since the last developments since Friday. And who didn't see that coming?

[Jumpin]

A week is a long time in volatile money markets. Seems extremely unlikely now that RBNZ will move in Sept. However, that doesn't necessarily mean that mortgage interest rates won't increase a notch or 2 if NZ credit rating comes under pressure. I looked back at ASB predictions over the last couple of years and thay have been consistently hawkish over interest rates, getting it wrong month after month, when actually continued low rates has not been hard to pick. They still predict a steeper curve than is reasonable, but at least they are not talking double figures any more. That won't come along till after 2020.

[One]

Question: Why did God invent economists?
Answer: To make weather forecasters look good!

[Bob Kane]

Rodney Dickens www.sra.co.nz has a recent article explaining how the interest rate increase will unfold (or not as it seems). Hopefully I've read it right:
- unemployment will need to drop noticeably
and then
- good wage increases need to occur
and then
- 9 months later inflation will occur
and then
- the Reserve Bank increases the OCR to keep inflation down.

Based on the above it would seem all the recent predictions that the OCR will jump up over the next 12 months could be wrong.

[Austrokiwi]

I really have no idea where the OCR will go. Like wise interest rates With the US?EURO turmoil I think there will be considerable demand destruction going on for a time( eg current drop in oil prices) so that will create downwards pressure. The kiwi dollar may drop and so compensate for the drop in demand by allowing NZ exporters to drop prices I don't see at the moment it putting more money into NZ. If S&P is right then we will see foreign interest rates going up. It is those rates that really drive NZ lending rates so the OCR may actually be shown ( again) to be a very blunt instrument. I suspect Eri's prediction of stagflation might be the closest to reality

[eri]

the usa fed has virtually promised that interest rates will remain close to zero for the next 2 years!

that's a really strong message for people to go out borrow and spend

and a clear sign that they are VERY worried about a depression

forget moral hazard

borrowers are to be bailed out

by transferring wealth from depositors

it will continue structural changes that are bad for the long term future of the economy

BUT they obviously feel they need to deal with this issue NOW

and future politicians can deal with future problems

later...

next Q is will NZ feel the need to cannibalize itself in this way?

[muppet]

Grab 'cheap' fixed rate now

ROELAND VAN DEN BERGH Last updated 05:00 11/08/2011



Mortgage rates should remain cheap for a few more months, but homeowners are being urged to take advantage of cheap fixed-term loans before it is too late.
The advice came as New Zealand and global shares staged a strong recovery yesterday on news the United States Federal Reserve will maintain low interest rates for the next two years.
Global economic uncertainty has led to most economists revising their expectation of an increase in the New Zealand official cash rate from next month, to the end of the year instead.
But Roger Kerr, an economist at Asia Pacific Risk Management, said homeowners should grab unrealistically cheap short-term fixed rates "before the herd fixes".
Banks were charging about 6.45 per cent for a two-year fixed rate and up to 6.99 per cent for a three-year term. Based on a floating rate of 5.75 per cent, payments for every $100,000 mortgage on a three-year fixed rate would increase by about $77 a month.
Most homeowners would not switch to fixed rates till the Reserve Bank had lifted the OCR. By then fixed rates would already have moved off their artificially low levels, Mr Kerr said.

More at

http://www.stuff.co.nz/business/5425551/Grab-cheap-fixed-rate-now

[drelly]

But Roger Kerr, an economist at Asia Pacific Risk Management, said homeowners should grab unrealistically cheap short-term fixed rates "before the herd fixes".

Now that US Fed is saying they will hold rates down for 2 years, how would that affect overseas borrowing?

[NovInvestor]

Cheap money + inflation (deflation of US dollar)

[Viking]

Roger Kerr is hopeless at forecasting.

[Bob Kane]

He's a week behind the rest of the world.

[Bob Kane]

I just noticed this quote from 19 July 2011:

Bank of New Zealand economist, Stephen Toplis, who has been leading warnings about inflation for months, says the Reserve Bank has all the evidence it needs to raise interest rates next week.

http://www.stuff.co.nz/business/mone...hand-inflation

Stephen has managed to get it wrong in quite spectacular fashion.
There was no evidence that the RB needed to raise interest rates at all.