Hold on for higher inflation
Floating mortgage rates could keep floating on up this year, now that higher inflation has been confirmed and the likelihood of Official Cash Rate hikes is increasingly strong.
Tuesday, October 17th 2000, 10:01AM
by Paul McBeth
Floating mortgage rates could keep floating on up this year, now that higher inflation has been confirmed and the likelihood of Official Cash Rate hikes is increasingly strong.
The New Zealand consumer price index increased 1.4 per cent in the September quarter and 3.0 per cent for the year to September, according to figures released yesterday. And there's more to come, thanks to the flow-through from a lower kiwi dollar, with the CPI expected to tip 3 per cent in the year to December.
The Reserve Bank was largely expecting the latest CPI increase, which hits the top of its 0 to 3 per cent comfort zone. However, the Bank is expected to hike up the Official Cash Rate to make sure that inflation does come back into line.
ASB Bank economists think that will be through two 0.25 per cent hikes between December and March, "but will be contingent on signs of higher economic growth by then".
Meanwhile, Deutsche Bank economists still think the Bank will leave the cash rate alone on December 6 (the next OCR review date). However, they expect the RB to start putting on the squeeze again early next year and then be fairly aggressive in trying to get the CPI down to the midpoint of its 0-3 per cent target range.
"Our call remains that the cash rate will reach 7.5 per cent by Q3 of next year."
The level of the cash rate has a direct bearing on floating mortgage rates and shorter term fixed rates. The OCR is currently 6.5 per cent, with most floating rates between 8.2 per cent and 8.5 per cent.
For the latest mortgage rates, go to our table.