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OCR cut unlikely this week

Economists agree there is little chance the Reserve Bank will cut the OCR this Wednesday. But they all seem to think a cut is on the cards for later this year.

Monday, October 1st 2001, 6:43AM

by Jenny Ruth

After his aggressive interest rate cut two weeks ago, practically nobody is expecting Reserve Bank governor Don Brash to cut the official cash rate (OCR) again on Wednesday, the official review date.

But just as near universal are the expectations of further rate cuts later on.

Brash cut the OCR from 5.75% to 5.25% on September 19, primarily as an insurance policy against the likely impact on global growth of the September 11 terrorist attacks in the US.

"Given the massive writedowns in the outlook for the global economy, rates are only heading one way at the moment," says Cameron Bagrie, an economist at National Bank. Bagrie expects the next rate cut will be timed for the November 14 monetary policy statement. "(A cut in the OCR to) 5% is a gimme as far as I’m concerned. You couldn’t rule out a bigger cut,’’ he says.

Adrian Orr, chief economist at WestpacTrust, says Brash has two big reasons to wait until November, the weakness in the New Zealand dollar since the terrorist attacks and the unexpectedly strong 2% growth in the domestic economy in the June quarter. The market had been expecting only 1.4% growth for the quarter.

"We think the economy’s kicking on quite well at the moment, but most of our major trading partners are lining up in a recessionary formation,’’ Orr says. WestpacTrust is looking for at least a 25 basis point cut on November 14.

While critical of the Reserve Bank changing rates outside its official review dates, Stephen Toplis, an economist at Bank of New Zealand, "we weren’t in the slightest bit critical of the decision to cut,’’ he says. Indeed, based on the central bank’s previous pronouncements, "50 basis points now look increasingly likely (in November). An eventual 75 basis point move before the cycle is complete is not out of the question.’’

Topliss says there’s even an outside chance of a rate cut on Wednesday. "We think the possibility is very slight, but it is no longer zero.’’

David Drage, an economist at ANZ Bank, is punting on no change on 3 October and a 25 basis point cut on 14 November. ``The reason why I would be towards the slightly more cautious end of the market is in reaction to the GDP data. There’s a fair amount of momentum,’’ Drage says.

Clearly, an international slowdown will impact on New Zealand, but Brash will still be mindful of some strong domestic inflationary pressures, he says. These include the strength of the labour market, with the participation rate at a historically high level.

"Even if the economy is undermined by recent developments in the world economy, those labour market pressures are likely to remain for some time,’’ he says.

« Mortgage borrowing rises $357 million in AugustOCR left at 5.25% »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 28 March 2024 9:42am

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