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Interest rate expectations: It’s not over yet

Most Kiwis think interest rate increases have peaked.

Thursday, March 7th 2024, 11:12AM

by Sally Lindsay

However, 15% are still expecting an increase, although that is down from 28% in October last year. 

They were responding to ASB’s latest Housing Confidence Survey.

ASB says the data highlights more people are starting to think a peak in rates might just be around the corner.

Relative to the October survey, 35% of Kiwis now expect higher interest rates (42%) and 20% expect lower rates (15%).

However, the latest survey was done over the three months to the end of January and before the RBNZ’s decision last week to keep the OCR at 5.5% and keep it higher for longer.

“While the margin between expectations for higher and lower rates is narrowing quickly, it still shows that more New Zealanders are braced for the prospect of further rate hikes, Kim Lundy, an ASB senior economist says.

Once again, the regional breakdown showed similar sentiment across the country. “Aucklanders think we’re slightly closer to the turning point (a net 14%) than the rest of the country, but not by much. South Islanders (excluding Canterbury) on the other hand were at the other end of the short spectrum, with a net 18% expecting higher rates.”

Lundy says the numbers sound about right, but a healthy dose of caution is warranted at this point in the cycle.

“We do think that the OCR has reached a peak but expect we’re still some way from RBNZ rate cuts – November this year on our forecasts.”

The upshot is that even in the absence of more hikes, it could still be quite a few months before mortgage interest rates fall from current levels.

“We’re not alone in that thinking either, with 31% of respondents expecting interest rates to stay the same,” Lundy says.

Neither a good or bad time to buy

Recent patterns persist, with survey respondents largely split on whether it’s a good time to buy a house.

Interestingly, the majority of respondents, 51%, think it’s neither a good or bad time to buy.

This is a pattern ASB has seen across the survey’s history.

Of those thinking it’s a good/bad time to buy, expectations that another upcycle is underway could be behind the good outweighing the bad this quarter, Lundy says.

“Following a decent house price downturn, there could be some ‘bargains’ to be snatched up before prices rise too far.”

However, ASB doesn’t expect sentiment around buying to get too positive while debt servicing costs remain elevated. And even accounting for the recent correction in house prices, affordability of the upfront purchase price remains a constraint for many households.

Market slump done and dusted

A rise in house prices is expected by a net 51% of respondents, the highest reading since October, just before the most recent housing market drop.

Kiwis believe the market slump is done and dusted.

Aucklanders are the most confident the tide has turned, with a net 56% respondents expecting higher house prices ahead.

The last time net house price expectations were at this level, annual house price growth was running at almost 30%. As of January this year, annual growth was a more muted 2.2%.

Tags: ASB

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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 7.79 7.39 7.25
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 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 7.29 6.59
SBS Bank Special - 7.14 6.69 5.99
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
Lender Flt 1yr 2yr 3yr
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 -
Westpac 8.64 7.89 7.35 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.75 6.65
Median 8.64 7.21 7.29 6.65

Last updated: 20 May 2024 10:01am

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