Floating mortgages sitting pretty
Kiwis on floating mortgage rates will be sitting pretty for some time yet, with no change to the Official Cash Rate and none expected until at least next year.
Reserve Bank Governor Alan Bollard announced this morning that the cash rate would stay on hold at the historic low of 2.5 per cent.
The floating rate is strongly linked to movements of the OCR in this country, meaning any major change will be precipitated by the Reserve Bank.
While the highly competitive 'mortgage wars' environment of recent months has seen fixed interest rates plummet, roughly two thirds of mortgage holders are still floating.
This morning Bollard repeated earlier predictions of modest growth and continuing uncertainty in Europe, firming up the widely held belief that rates are going nowhere soon.
The little-changed economic outlook means the holders of almost one million floating loans will likely have at least eight to 12 months before a rate rise.
Standard floating mortgage rates amongst the banks range from 5.65 per cent to 6.24 per cent, with SBS, HBS and Kiwibank leading the market.
Floating rates have hovered at historic lows for the past two years, compared to peaks well above 10 per cent in the lead-up to the global financial crisis.
"There's a degree of certainty that interest rates are unlikely to be going up this year, and that remains," said ASB chief economist Nick Tuffley.
"There's still certainly that issue of they will go up in the future at some point, but that does not seem to be right around the corner."
Deutsche Bank chief economist Darren Gibbs said if there was an earlier change, it was actually more likely to see rates plumb new lows.
''We continue to think that for at least the balance of this year a cut in the OCR triggered by developments offshore will remain more likely than a hike in the OCR driven by developments at home.''
Tuffley said ASB's forecast was unchanged: "we still view March as about the earliest we would see rates going up, and we see the risks being skewed to a later start than that."
ANZ chief economist Cameron Bagrie was looking at a possible rise mid-next year, although he said that would be heavily influenced by other factors.
"The global economy still has to stabilise before that happens."
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