Wheeler should move rate now: Economist

She said once annual house price inflation crossed the double-digit percentage mark, as it has done around much of the country, Governor Graeme Wheeler should do something about it.

The Reserve Bank is considering the use of macroprudential tools to slow house price inflation, such as loan-to-value restrictions or requiring banks to hold more capital against lending.

Beacher said households were locking in cheap fixed mortgage rates. “So by the time Wheeler finally hikes [the official cash rate] he’s going to have a lot of heavy lifting to do.”

Both she and Paul Bloxham of HSBC expect the Reserve Bank to raise the official cash rate in December, despite Wheeler’s announcement that rates would not move this year. Beacher predicts a rate of 4% in December next year.

Infometrics managing director Gareth Kiernan expects mortgage rates to start moving at the end of this year, ahead of an official cash rate hike in March 2014.

JP Morgan’s Tom Kennedy appears to expect Wheeler to make a dramatic turnaround before his next official cash rate announcement. Kennedy expects the rate to lift to 2.75% in June, and 3% in September.

Comments from our readers

On 26 March 2013 at 11:01 am Mal said:

Upping the rate, or loan to value, won't worry the investor but will kill off homebuyers. Better to limit how many houses any adult can have, (not offloaded to minors) before a penalty tax kicks in. Like 10 at moment reducing to six over a few years. Then whammo! Investors could have 5 years to reduce number of homes they own.

On 28 March 2013 at 2:04 pm C Popple said:

Anyone writing articles like this clearly has not been along to an Auckland auction. Have a look who is bidding, have a look who is buying many of Auckland properties. There is a good chunk of foreign investors hence foreign capital. It does not matter how much you increase the interest rate you wont impact these people. They are investing for reasons in addition to investment return like the fact NZ is a safehaven, owning property helps with immigration points, no corruption etc etc. Wake up get off your backside and go to some auctions regurlarly. By putting up interest rates you will hurt NZ citizens and permanent residents who should be the only ones allowed to purchase residential property. If we only allowed NZers to purchase there would be no housing crisis. Perhaps by way of a question on the sale and purchase agreement a register could be created of purchasers and citzenship or otherwise and that way we can identify how big the problem really is.

Wheeler should move rate now: Economist

New Zealand house prices are increasing at such a pace that the Reserve Bank should act now, says TD Securities economist Annette Beacher.

Friday, March 22nd 2013, 6:00AM 2 Comments

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