Hints of mortgage rate rises
Although the Reserve Bank has raised its Official Cash Rate 25 basis points, home loan rates generally haven't yet followed suit.
Friday, June 11th 2004, 10:35PM
Since the Reserve Bank hiked its Official cash Rate to 5.75% on Thursday only two major banks have increased their rates.Westpac put its floating rating up 35 basis points to 8.10%, plus it has raised all its fixed rates by 10 basis points. The only other bank to move is ASB - and all its done is put up its floating rate to 8%.
The slowness to move rates and the level of the new rates contradict earlier predictions of what would happen after the central bank's Monetary Policy Statement.
One economist suggested that instead of raising floating rates the full 25 basis points (bank floating rates are at 7.75%) they would go to either 7.95% or 7.99%. However the two bnaks to move have gone above the 8% mark.
Westapc saus its increases equate to an increase of $45.49 per month on a mortgage of $100,000 over 20 years.
ASB said in a statement it expects fixed home loan rates will also following a review next week.
More rises are likely to follow. Reserve Bank governor Alan Bollard signalled on Thursday that there would be more rises, and that floating home loan rates are likely to hit 8.5%.
What's the best deal?
Bank of New Zealand economist Tony Alexander says the best option is to fix for either two or three years before another round of increases goes through.
"Over the past five weeks we have seen the two year housing fixed rate go from 6.69% to 7.15% and the three year rate from 6.89% to 7.5%."
"But margins are still too low relative to the norm at these levels so more rises beckon and the wise borrower would get in before this next round of increases occurs."
"At current rates my preference is for the two year rate at 7.15%," Alexander says.
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