by Paul McBeth
With the risk increasing that the Reserve Bank will raise interest rates in a fortnight, it's looking like a good time to lock into a cheap mortgage deal.
Mortgage banker Cairns Lockie has got into the Christmas spirit already, launching its Quick Start Home Loan this week in what it's calling a pre-Christmas mortgage sale. At a rate it believes is the lowest in the market, 7.75 per cent, the Quick Start stays fixed for a year then reverts to a regular floating rate loan.
With one and two-year fixed rates currently popular choices for borrowers, the spotlight is on December 6. That's the date of the RB's next look at monetary policy and its review of the Official Cash Rate, a key influence on floating and short-term fixed rate mortgages.
ASB Bank economists said today, in the bank's weekly economic report, that short-term interest rates have already moved slightly higher over the past week as the market prices in a higher risk that the RB will lift the OCR. They said that the risk of significantly higher and/or more persistent inflation is now larger, pointing to employment data that suggested the economy did actually grow in the September quarter.
"This could well prompt a quarter per cent cash rate hike this year and maybe another such move in the March 2001 quarter, with the view that a little tightening is better than the risk of sharply higher rates mid 2001."
And in a previous report, they said that the CPI was expected to remain above two per cent for all of 2001, with pressure coming from the ongoing adjustment to the low Kiwi dollar and likely higher wages.
"The danger is that inflationary momentum is established. That said, inflation is high at present only by exception and is expected to be below two per cent within 18 to 24 months.
"At present, it is the inflation risk rather than the inflation expectation that will concern the RBNZ."