Interest Rates

[Bluekiwi]

I see NZ inflation rate has dipped to around 1%. Such a low level indicates (to me at least) that NZ is finally starting to loose the fight against deflation. As for interest rates....if the inflation rate keeps at the current level or drops further there is no way the RB is going to raise interest rates: the normal action with such low inflation rates would be to lower the OCR. Given the anti PI drivers I don't think the Reserve bank will go that way howeever they are very unlikely to raise the OCR.

Westpac Economists would disagree with you strongly, they see a lot of pent up inflationary pressures working their way to the surface - mid way to latter this year.
Citing the christchurch rebuild and the drain on resources this will entail as one of the drivers.

Tony Alexander at BNZ (who displays more common sense that your bog standard economist), would also point to bumpy growth and a need for the OCR to start rising in 2014 with some inflationary pressures around then.

[Austrokiwi]

Westpac Economists would disagree with you strongly, they see a lot of pent up inflationary pressures working their way to the surface - mid way to latter this year.
Citing the christchurch rebuild and the drain on resources this will entail as one of the drivers.

Tony Alexander at BNZ (who displays more common sense that your bog standard economist), would also point to bumpy growth and a need for the OCR to start rising in 2014 with some inflationary pressures around then.

Lets see what happens:

[Bluekiwi]

I think house prices are exlcuded from the CPI and they are on the move.
The high NZ dollar has also kept inflation down.

While OCR and floating rates may stay where they are for most of this year.
Fixed rates may rise at some stage.

[essence]

ASB kick off 2013 mortage war

ASB Bank has cut its long-term fixed mortgage rates, marking the first signs of life returning to the aggressive home loan market this year.

Source

[Perry]

Warning For Buyers As Rates Descend
Andrea Fox
22/01/2013

The year is off to a cut-throat start between mortgage lending banks
with ASB easing its long-term fixed interest rates, but an influential
financial adviser is warning that the cheap rates could be leading
Kiwi home-buyers into financial danger.

With many fixed-term rates now cheaper than floating mortgage rates,
Waikato mortgage brokers said droves of their clients were switching
to fixed terms, mainly six months to one year, and report their
busiest pre-Christmas period since boom real estate year 2007, with
particular demand from first-home buyers.

[McDuck]

You can strangle your opponent’s “pawn grab” tactic, by removing pawns from the game
(by locking the pawns up in long term agreements).

Unfortunately, your opponent can unlock those pawns again by offering to compensate the pawns for the cost to break the contracts.

Not to worry, You soon make the loot back - by upping the rent the pawns pay for their squares, and you do that by using the present tactic of making the squares all a Mobius strip..

[JABlog]

ASB kick off 2013 mortage war



Source

I think there is more to come- this will set the scene for the rest of the year.
floating 5.25 fixed 4.99 2 yr fixed and now with cashbacks on offer why would you fix until later? Anyone?

[LondonKiwi]

http://www.stuff.co.nz/business/money/8229749/Banks-split-on-timing-of-interest-rates-climb

Perhaps time to start fixing rates this year then...

[essence]

OCR left at 2.5pc - property fears for Reserve Bank

Source

Wheeler is facing increasing pressure to use macro-prudential tools, such as limiting loan-to-value ratios or increasing banks' capital requirements, to deliver looser monetary conditions and take some pressure off the strong New Zealand dollar. The governor has been reluctant to accept this lobbying, saying the tools, which are still under construction, are to protect the country's financial stability, not influence monetary policy.

[NovInvestor]

It will be interesting to see how RBNZ tackles the housing bubble.

[Learning]

It will be interesting to see how RBNZ tackles the housing bubble.

Does the RBNZ have the right tools to tackle the housing bubble without causing other problems? They are also concerned with an over inflated NZ$. If the RBNZ raise interest rates to reduce the attractiveness of property investing, more countries will invest in our dollar inflating it even more.

Printing more money perhaps? (control-P, control-P, control-P...) Lower dollar and raise interest rates to off-set the resulting inflation? Net result - a lot of important people pee'd off for very little gain.

I think the RBNZ is between rock and hard place. Only the government can tackle each issue with the least negative impact on the other. Stamp duty, CG Tax... Not likely under National and big fella forbid the red crowd get in next election or the brown stuff is really going to hit the whirly thing! (person opinion of course)

[NovInvestor]

Does the RBNZ have the right tools to tackle the housing bubble without causing other problems? They are also concerned with an over inflated NZ$. If the RBNZ raise interest rates to reduce the attractiveness of property investing, more countries will invest in our dollar inflating it even more.

Printing more money perhaps? (control-P, control-P, control-P...) Lower dollar and raise interest rates to off-set the resulting inflation? Net result - a lot of important people pee'd off for very little gain.

I think the RBNZ is between rock and hard place. Only the government can tackle each issue with the least negative impact on the other. Stamp duty, CG Tax... Not likely under National and big fella forbid the red crowd get in next election or the brown stuff is really going to hit the whirly thing! (person opinion of course)

Yeah you are right on the money, hence RBNZ has little choice to leave the OCR where it is, and stand on the sideline.

If they reduce the LVR people can buy homes with, then first home buyers (those who need 90-95% mortgages) will be pissed, and will not vote for the current government.

If they reduce the core lending ratio (what ever the term is) of banks, well I think the banks are sitting on a lot of term deposits atm, so the effectiveness is not much.

Hard decisions for the bank and government, but as a PI, I'm laughing all the way to the bank atm =)

[TheLiberalLeft]

You should have found a way to squeeze in a 3rd variant.

[Learning]

but as a PI, I'm laughing all the way to the bank atm =)

Until bubble goes "POP"

[TheLiberalLeft]

Asycronous Transfer Mode - A high speed optical communication protocol based on 53 byte packets