The financial markets aren’t expecting the Reserve Bank of New Zealand to change interest rates on Thursday, so it’s the central bank’s rhetoric on inflation and the impact of high oil prices on the economy which will be dissected in all its minutiae.
Escalating inflation risks will make the Reserve Bank cautious about hints of rate cuts on Thursday in the quarterly monetary policy statement and its hawkish tone is expected to continue.
This will highlight that the potential for lower floating mortgage rates is way out on the horizon, well into 2006.
Some market analysts are talking about the New Zealand dollar taking the expected economic pressure first up, before interest rates.
Although no increase is expected in the OCR on Thursday there is a trend developing for one-year rates to rise a bit.
Those to raise one-year rate five or 10 basis points this week include ANZ, Cairns Lockie, General Finance, Sovereign, NZ Home Loans and AA, NZ Finance and Wizard.
One year rates now range from a low of 7.60%, shared by Southern Cross and the Public Trust to a GEM Home Loans’ 8.40%. Most rates in this area are pitched just under the 8% mark.
The opposite is happening in the longer end of the market with some four and five year rates coming down.
A couple of lenders, ANZ in particular, have dropped their rates with ANZ chopping four- and five-year rates from 7.6% to 7.5%.
In the area of specials we have seen details of ANZ’s Spring campaign and Kiwibank appear to have ended their five-year fixed rate special. It was offering 6.99% for loans of $100,000 or more, however 20% of the loan had to be on a variable rate.
Over at ANZ when someone takes out a home or residential investment loan they are able to choose a holiday. That’s because they earn ANZ home and holiday credits based on the value of the loan. These credits are exchanged for flights, accommodation or both chosen from a list.
Borrowers can choose a holiday from more than 200 properties in New Zealand, Australia, Fiji, the Cook Islands, or Vanuatu. None of the other big banks have revealed their spring campaigns yet.
However, Bank of New Zealand chief economist Tony Alexander made a suggestion last week that the chance of “some nice discounted rates” may eventuate in these campaigns. It will be interesting to see if that eventuates.
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