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Don’t panic about the OCR increase

Thursday, June 10th 2010, 12:59PM

Reserve Bank governor Alan Bollard raised the official cash rate (OCR) by 25 basis points to 2.75% today and more hikes are expected to follow.

The Reserve Bank's statement can be read here.

Although the rise means floating and short-term rates will start to increase, economists are saying borrowers shouldn't panic.

We also have a graph showing floating rate projections for the next year.

The only mortgage rate changes this week were made by Housing New Zealand Corporation which increased its one-year rate by 20 basis points to 6.35% and its two-year rate by 10 basis points to 7.20%  with rates still below the medians for non-bank lenders.

 

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Latest Trends
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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