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Rise in households struggling with mortgage repayments; RBNZ: house prices still near top of sustainable levels

Mortgage arrears continue to rise but are still low by historical levels. [READ ON]

The Reserve Bank says house prices remain near the top of its estimate of sustainable levels and remain “a stretch” for many would-be buyers. [See here]

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RBNZ expected to raise rates this week

For once, economists are all of the same mind: the Reserve Bank will raise interest rates again on Thursday and will leave the door open for a further rate hike.

Tuesday, June 8th 2004, 6:32AM

by Jenny Ruth

Economists expect the central bank will raise its Official Cash Rate (OCR) from 5.5% to 5.75%.

The move is expected even though Australia’s central bank has left its cash rate unchanged.

Macquarie Bank’s economists note that both New Zealand and Australia have enjoyed healthy growth in recent years, even though their trading partners have struggled.

"This partly reflects the deft handling of monetary policy by the central banks. But it would seem foolhardy to assume that the economic sunshine will continue indefinitely," Macquarie says.

The Australia central bank’s restraint provides some optimism about the growth outlook, but the New Zealand central bank seems intent on lifting rates, even though growth is expected to slow substantially, it says.

"This, of course, tilts the risk surrounding the outlook substantially, in our opinion." There are two major reasons economists think the New Zealand bank will move. Firstly, after hitting 71 US cents earlier this year, the New Zealand dollar has retreated to a little above 60 cents and isn’t looking likely to take flight again.

Secondly, recent data suggests the New Zealand economy remains stronger than expected.

"Data released over the past month has raised doubts about the extent to which domestic economic momentum is easing and, indeed, whether it is doing so at all," says ANZ Bank’s economists.

For example, employment growth accelerated in the March quarter, taking the unemployment rate to 4.3%, its lowest level in 16 years, and March quarter retail sales rose 2.8%, much greater than expected. And, of course, while the housing market is showing signs of coming off the boil, it remains very strong.

Both these factors raise the spectre of rekindled inflation. As Kate Skinner, an economist at ASB Bank, says: "A slowdown in growth is still expected later in the year but, at this stage, it looks unlikely to be as severe as was though several months ago."

Westpac’s economists note that increasing government spending and the surge in oil prices will provide further reasons for the Reserve Bank to raise rates. Westpac argues the bank should ignore higher oil prices unless it becomes clear this will cause generalised inflation and also says that economic growth could be depressed by as much as 0.5 percentage points over the next year if current oil prices are sustained.

National Bank senior economist Cameron Bagrie also notes that rising commodity prices and the strengthening global economy are yet more reasons for a rate hike.

But like Macquarie Bank, Bagrie also has an eye on the slowing Australian economy. "Given the 80% correlation between the New Zealand and Australian business cycles, the Reserve Bank should be mindful of the same occurring in New Zealand," he says.

« Broker not necessarily totally unbiasedRBNZ hikes OCR as expected »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 ▼5.65 ▼5.55 ▼5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 ▼6.39 ▼6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - ▼6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 ▼5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.79 6.49 6.49
TSB Special 7.89 5.99 5.69 5.69
Unity ▼7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.50 ▼6.19 ▼5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.17 5.79 5.69

Last updated: 30 October 2024 9:36am

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