OCR increase good for property market

Real Estate Institute president Peter McDonald claims the rising OCR will not adversely effect house prices.

"In fact home buyers are being promised a market environment in which they can safely plan long term," he says. His reasoning in that the Reserve Bank has indicated any further increases in the OCR will be "only gradual if needed at all."

He says because more than 30% of mortgage debt is now on floating rate and long-term interest rates are higher than short-term interest rates, the OCR will not need to be increased at the same speed as in previous recoveries.

"Interest rates are only one of many factors which influence the property market," McDonald says. "While (Reserve Bank governor Alan) Bollard notes that households continue to be cautious about investing in homes, median prices are still up on a year ago as we have not yet caught up on the supply shortage caused by the fall in the building of new houses during the recession."

"It must also be reassuring for home buyers and investors that the Reserve Bank has found clear signs we are well into a recovery with businesses planning increased investment and unemployment still trending downwards," McDonald says.

"So those people who have been holding off on plans to buy a home can be confident it is a good time to go ahead."

Comments from our readers

On 11 June 2010 at 11:06 am funnyidea said:

you are so so funny: "So those people who have been holding off on plans to buy a home can be confident it is a good time to go ahead."
Interet rate increasing, now you buy - means will paymore interest, can be offside from the price down? need to go to babycare centre to learn. simply say to see - Return =rent-interest-other cost + other benefit

On 11 June 2010 at 5:10 pm Christopher said:

Be unusual for rising interest rate not give prospective first buyers or buyers trading up cause to pause.More spin but lets be gracious and suggest the point Mr McDonald wanted to make is that interest rates will still be very low and increases likely to be well signalled and well spread.

On 15 June 2010 at 3:24 pm Terry Raggett said:

This is ""the emporer has no clothes"" stuff. Little wonder the public perception of real estate agents and companies is as it is. Ah well, spin is not just the domain of polititions and car salesmen after all.

On 16 June 2010 at 1:14 pm Alison said:

First home buyers would do well to consider that over a 20 year period of a mortgage, anything under the 8.95% rate is attractive. Provided they build into their budgets for contingencies relevant to today's market, i.e. fragile employment figures, and split their loan between 5yr and floating, they increase certainty. After all - they would not be buying at the top of the market and they have plenty of property to choose from!!

OCR increase good for property market

The Real Estate Institute is saying that the increase in the official cash rate, which will lead to higher mortgage rates, is good for the property market.

Thursday, June 10th 2010, 8:00PM 4 Comments

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