Views changing on interest rate moves

The latest survey of economists, done by Mortgagerates.co.nz, shows that even the experts are unsure of what will happen with interest rates.

Monday, August 15th 2011, 8:47AM

The majority are picking that the Reserve Bank will lift the official cash rate between 25 and 50 basis points in December.

"However they are less certain than ever," publisher Philip Macalister says. "Normally economists place a pretty high probability on their predictions, but that has not been the case this time around."

Also recent economic events, particularly in global markets, have forced the economists to change their forecasts made just after the recent OCR announcement.

In the home loan market ASB moved soon after OCR announcement and increased nearly all its fixed rates. Since then it has done a u-turn, and dropped its rates all to positions lower than before the rises.

Interestingly none of the trading banks have followed suit and lowered rates across the board.

The exceptions are Kiwibank which dropped its one-year fixed rate to 5.65%, the same as its floating rate.

Mr Macalister says Kiwibank has regularly taken market leading positions on specific terms.

"This current move, which it has promised will last until the end of this month, looks like being the first shot fired in the up-coming Spring advertising campaign.

Westpac and Kiwibank also increased the rate on their capped one year loan, giving some indication of where they expect rates to move to over time.

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