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Procrastinate while you have the chance

Thursday, May 6th 2010, 3:51PM

The Reserve Bank of Australia raised its benchmark interest rate this week by 25 basis points to 4.5%, further widening the gap with New Zealand's Official Cash Rate (OCR) which is at a historically low level of 2.5%.

Meanwhile, Reserve Bank Governor Alan Bollard today stated that New Zealand's recovery from the Global Financial Crisis is entering a new, less fragile stage, which will allow monetary policy stimulus to be removed. Read here to see how the Reserve Bank will do so with Bollard's truck driver analogy.

We also look at the marked shift to floating and short-term rates by borrowers last year.

KPMG's 2009 Financial Institutions Performance Survey found that between 50% and 80% of borrowers preferred floating or six-month fixed rates, where there had previously been 80% of home loans in fixed terms. See other interesting findings from the survey here.

In Expert Views BNZ economist Tony Alexander says borrowers should procrastinate while they have the chance and stay floating.

There are no mortgage rate changes this week to advise of.

 

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Earthquake to rattle rates

 

The effect of the Christchurch earthquake has even rattled mortgage rates heralding a turning point to the current trend of a flattening yield curve with floating and short-term rates increasing and long-term fixed rates falling.

Expect from here on to see the graph in front of you flipped, as economists expect the yield curve to steepen. The reason for this is that the 7.1 magnitude earthquake that hit Canterbury and the collapse of South Canterbury Finance last week has eliminated any remaining chance of a September Official Cash Rate (OCR) hike according to economists. Most are now not expecting monetary policy tightening until 2011.

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Disclaimer: Every possible effort has been made to keep the information in the rates tables as accurate as possible, however, neither the publishers of Mortgage Rates nor anyone engaged to compile these tables accept any liability for inaccuracies or any loss suffered as a result. It is strongly advised that readers check loan details directly with the provider concerned.

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