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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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Next OCR hike not till March: ASB

ASB has reviewed its interest rate forecasts and now pushed back the date when it thinks the official cash rate will next rise.

Tuesday, August 12th 2014, 9:11AM

It has moved the next OCR increase back three months from December to March next year.

"The interaction between dairy prices, the NZ dollar and interest rates suggest that something will have to give. In the absence of a substantial rebound in global dairy prices or a substantial fall in the NZ dollar, interest rates will have to remain stimulatory for longer than we had expected." 

ASB chief economist Nick Tuffley says a longer pause in the tightening cycle would buffer the economy from lower dairy prices and continued strength in the dollar.

 "Recent inflation outcomes also suggest the Reserve Bank has time on its side."

The latest labour market data show a continued moderation in construction labour cost growth in Canterbury despite strong construction employment.

"This suggests capacity pressures in Canterbury are not translating to as much cost growth as initially feared."

He also says that softer than expected non-tradable inflation will ease capacity pressures and headline inflation remains in the bottom half of the Reserve Ban's inflation target band.

"Both we and the RBNZ do not expect inflation to reach the 2% mid-point target until mid-2015." 

The continued moderation in house price inflation should also be of comfort for the central bank.

"Annual house price inflation peaked at just over 10% late last year, and recent housing market indicators suggest house price inflation may undershoot the RBNZ’s forecast." 

Despite pushing back the date for the next OCR rise there is still the possibility the Reserve Bank will move earlier.

"To the extent we saw the risk to our December call as skewed to a later increase in the OCR, we see the risk to our new March call as skewed to an earlier OCR increase."

Underpinning these risks that an OCR could come earlier than March are:

  • Sharp drop in the NZD and/or a strong rebound in global dairy prices – this would reverse a key rationale for us pushing out our forecast of the next OCR increase.
  • Stronger than expected net migration, and the relative effects on household demand versus labour supply. 
  • Stronger wage growth than the RBNZ forecast. The RBNZ’s June MPS forecast of 1.7% annual labour cost inflation for the year to March 2015 is looking low in light of the Q2 labour market data showing a pick-up in wage growth. 

ASB is forecasting 25 basis point OCR increases in March, June, September and December next year.

"Our updated OCR view is broadly in line with current market pricing through to June 2015. Beyond that, we expect the OCR to be raised faster and by more than markets currently expect. We continue to expect the OCR to peak at 4.5%, but now expect this peak will not be reached until the end of 2015," Tuffley says.

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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 ▲8.15 ▲6.79 ▲6.45 ▲6.29
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 ▼8.10 ▼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 6.24 6.09 5.69

Last updated: 1 November 2024 2:24pm

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