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Mortgage Rates Daily Commentary
Thursday 11 July 2024  Add your comment
One bank cuts home loan rates

Westpac has cut three of its home loan terms between 10 and 25 basis points.

The biggest cut is to its one-year rate which is down to 6.89% and 7.49% for its Special and Standard rates respectively.

To see how it stacks up against other lenders check our table here where we have sorted on lowest to highest one-year rate.

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What the experts said

Here we wrap up with the economists read into yesterday's Reserve Bank Monetary Policy Statement yesterday.

Friday, June 14th 2013, 8:48AM

The Official Cash Rate was yesterday left at 2.5%. Here’s what the commentators said:

Christina Leung, ASB:

The RBNZ kept the OCR on hold at 2.5%, as universally expected. The Monetary Policy Statement itself did not contain any major surprises. There was, though, some interesting discussion of the outlook for the NZ economy and interest rates. While the growth forecasts are relatively similar to the March MPS, the RBNZ does sound more upbeat about the footing of the NZ economy and the sustainability of growth. Meanwhile, house price and, as a result, inflation forecasts were revised up.

The biggest change to the RBNZ’s forecasts came in the NZD TWI track, which was also revised up once again. The revisions would have been made in response to the April strength in the NZD (with the TWI setting a new post-float high), but finalised before the recent falls in the exchange rate. Still, it seems that the RBNZ, like us, expects the NZD to remain elevated for much of the next 12 months. Once again, the MPS includes a ‘scenario’ in which the OCR is cut in response to a higher-than-forecast TWI. That scenario is paired with another that foresees higher interest rates in response to faster house price increases and stronger domestic demand. That will continue to be the key tension for the RBNZ. On balance, we continue to expect a first OCR hike in March 2014.

Dominick Stephens, Westpac:
The Reserve Bank played a very straight bat in its Monetary Policy Statement.

The main points were that the domestic economy and housing market are heating up, but the high exchange rate is constraining inflation. This leaves the RBNZ between a rock and a hard place. Balancing these two opposing forces, the RBNZ decided to repeat the bias statement from the last two OCR reviews, as Westpac expected:

"Given this outlook, we expect to keep the OCR unchanged through the end of the year".

Within the detail, the RBNZ did observe that the domestic economy is performing even better than previously expected, so inflation is expected to rise above 2% sooner than previously forecast (in 2015). However, the RBNZ upgraded its exchange rate forecast. On balance, the result was a 15 basis point upgrade to the 90-day interest rate forecast, with the first hike coming in September 2014. Again, all of this was in line with Westpac's preview of the MPS, and comes as no surprise.

The statement contained two alternative scenarios. In the first, house prices rise faster than forecast and, consequently, the OCR has to rise faster than in the central projection. In the second scenario the exchange rate rises higher than forecast, and in response the RBNZ reduces the OCR. One key point was to illustrate just how much the exchange rate matters for monetary policy.

We would note two things about these scenarios. First, the exchange rate has actually fallen 5% since the MPS forecasts were finalised. By the logic of scenario two, if the lower exchange rate is sustained then the RBNZ will be minded to increase the OCR sooner.

The second point to note is that the RBNZ's central projection assumes no change in macroprudential regulation. If macroprudential regulations are in fact implemented, and if the housing market slows as a consequence, then the RBNZ would be less minded to increase the OCR steeply.

In fact, we were surprised that the possibility of restricting high loan-to-value mortgage lending did not receive more attention in the MPS. This is probably simply due to the unconfirmed nature of the possible regulations - the RBNZ does not want to tie its hands at this stage. We still think that high LVR lending could well be restricted this year.

We were unsurprised by the tone of this Monetary Policy Statement, and have not changed our views on monetary policy. We continue to expect a significant hiking cycle from March 2014. We are more hawkish than the RBNZ because we believe rising house prices and the Canterbury construction boom will translate into inflation more fully than the RBNZ expects. We were encouraged to see the RBNZ modify its dubious assumption that rising house prices will not provoke much extra consumer spending - but the RBNZ still has not gone far enough, in our opinion.

Ben K Jarman, JP Morgan:
Since the RBNZ’s last OCR decision in late April, the domestic data have firmed, entrenching the likelihood that above-trend growth persists, and the TWI is down around 5%. Given that inflation still looks benign, it seemed likely that the Governor would not want to been seen enthusiastically embracing either of these developments, since an overly hawkish bent could quickly see the currency reverse course. As a result, today’s OCR commentary was left mostly unchanged, save for a slight firming of the inflation themes and conviction that growth will push yet further above potential. The wariness on house price inflation, which is “rapid”, has not gone away, but nor have the downside risks from currency strength and fiscal consolidation.

In the inflation commentary, Governor Wheeler ditched his line about “weak-near term inflation prospects”, from the last OCR decision in April, and replaced this with the slightly less dovish assertion that inflation is “likely to remain low”.
And the trajectory from here now looks for a “trend upwards”, rather than for inflation to only “gradually” rise. The growth forecasts also are explicitly dropped into the OCR commentary, which they were not in April, and the numbers are striking. The RBNZ are looking for annual GDP growth “to accelerate to about 3.5% by the second half of 2014”. The Governor does note qualify this, stating that
growth is “uneven”, but that seems to be a desire to sound balanced, given that the business surveys cited later in the MPS seem to contradict that, with “increases in activity broad-based across industries”.

The fact that inflation is so weak, and expected to remain so against this growth backdrop, is pretty remarkable given that potential growth, by our estimates, likely is closer to 1.5%, and by the Bank’s own estimation in the MPS, “much of the spare capacity that accumulated in the economy following the financial crisis has now been brought back into productive use”, with the current output gap estimated to be effectively zero. Given that the output gap is not assumed to race away from here (peaking at only +1%), clearly the Bank has a background assumption of quite pro-cyclical potential growth. The danger is that while this analytical approach might “work” empirically in describing inflation, is also assumes implicitly that the central bank is running the same reaction function as it did in the past. When they do not (for example keeping policy on hold despite persistently above trend growth) the output gap might not prove so self-correcting, and therefore inflation not so benign in the out years.
In the MPS, the sequential growth forecasts for the next few quarters were pulled down reflecting some payback from the stellar 4Q result, and also possibly incorporating updated information on the drought, which the Bank now expect will drag 0.5%-pts from growth in 1H13. But the drag is pretty minor, and on net still results in higher annual growth forecasts than in the last forecast round. For 2013, annual growth now sits at 2.6%, from 2.5%, and the upgrade for 2014 is chunkier, at 3.3%, from 2.5%. Expectations for 2015 though have been tempered quite a lot, down to 2.3% from 3.3%.
This was not the time to officially upgrade the inflation forecasts, but given the growth inputs, this required some nimble manoeuvres from the forecasting unit. The TWI forecasts closed this loop (and weaker petrol prices helped near-term, too).
Given that the currency has been demonstrably weaker since late April, we did not see a case for further upgrades, and expected the projections to be held steady, but the path was raised yet again by a further 2-3% across the board. This results in the official TWI forecasts drifting to around 5% above spot. As we have noted previously, raising the TWI forecasts has in recent history been the most
effective jawboning device the RBNZ has deployed, in that markets tend to place a lot of weight on the rates implications of a stronger currency. So there may have been a tactical angle to this forecasting decision. The end result is that the inflation forecasts are a tenth weaker this year, and a tenth stronger in 2014 and 2015.

The bank bill forecasts are unchanged, though are marginally higher in 2015, which explains some of the growth downgrade for that year.
The risk scenarios outlined in the MPS essentially separate out the two parts of the dilemma facing the RBNZ. In the first scenario, domestic demand overshoots the forecasts, which is quantified as a 3%-pt uplift on the Bank’s central forecast for peak house price inflation, up to 14%. In this scenario, the Bank is forced to hike rates earlier, possibly around the end of this year. In the other scenario, the currency jumps above even the upgraded TWI forecasts, to near 80, in a “portfolio driven” (i.e. not fundamentals-driven) fashion, and holds there. In this case, the RBNZ is cutting rates. We view the former risk as more likely, though acknowledge that while there is only one piece of hard data in New Zealand that would not justify a rate hike, it is a pretty important one, in inflation, and without an inflexion in the price data, it is hard to see the RBNZ hiking rates near term. The next inflation print in mid July will be important on that front.

Tony Alexander, BNZ:
The Reserve Bank reviewed the 2.5% official cash rate this week and as had been universally expected left it unchanged. They made no alteration to their previous indication that the rate tightening cycle will start in the September quarter of next year though pointed out that rate rises will naturally be influenced by movements in the exchange rate. Given time spent at Fieldays I am afraid that is it as far as analysis of their comments goes this week. Sorry.

« Liberty finally gains control of Mike PeroConsumer confidence stats won't change RBNZ mind: ASB »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.74 7.74 7.09 6.95
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Lender Flt 1yr 2yr 3yr
Westpac 8.64 ▼7.49 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - ▼6.89 6.75 6.39
Median 8.64 7.14 6.82 6.65

Last updated: 11 July 2024 1:26pm

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