Conflicting views on interest rate movements
Although short-term fixed home loan rates have fallen in the past week, the majority of respondents to a housing confidence survey expect rates will rise.
Tuesday, May 20th 2008, 5:43AM
It says that 62% of people expect higher interest rates, 8% expect decreases and 17% believe interest rates will stay the same. The remaining 13% don't know what will happen.
ASB economist Nick Tuffley says this is one of the reasons people expect house prices to decrease in the next twelve months.
He says the survey shows the "balance of recipients believe now is a bad time to buy (a house)."
"It is probably this interest rate expectation that encourages people, on balance, to believe that now is not good time to buy a house," he says.
While survey respondents are expecting higher rates, ASB itself is now forecasting that the Reserve Bank will "cut rates in September, rather than late 2008 - early 2009."
"The RBNZ has already shifted its risk bias in a six-week space that has shown a few warnings about the health of the economy. That is a signal that the RBNZ has already started the gradual shift towards eventually expressing a clear easing bias."
"We see the Reserve Bank waiting to ascertain that the current wave of 'doom and gloom' is more than just a patch the economy is going through."
ASB is now expecting that the central bank "will begin cutting the OCR at the September 11 meeting, delivering a 50 basis point cut."
| « OCR cut of 50 points forecast | Floating up, fixing down » |
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