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[UPDATED] Perky housing market may force rate hike

Tuesday, January 24th 2012, 6:00AM

UPDATE: SBS has cut its fixed rates today

Westpac suggests the Reserve Bank has probably shifted the projected start date for OCR hikes out, but the "perky" housing market may alter things.

It says the central bank has probably pushed the start date for OCR hikes out from June to maybe September.

"Market pricing suggests the OCR will remain on hold until mid-2013, but we would not go that far due to the state of the housing market."

"It seems clear that low interest rates have imparted a significant stimulus to the housing market. If prices continue to scoot higher this year, the Reserve Bank may well feel entitled to nudge the OCR gently off its all-time lows."

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Future interest rate hikes softened

The Reserve Bank has kept the OCR at 2.50% as expected, but had lowered its forecast track for the 90 day bill rate by around 60 basis points (0.6%) to a peak of 4.30% by the end of next year.

For borrowers that means floating home loans are not forecast to rise as much as previously forecast. In June the expectation was that the rates would rise 2% in the next 12 months: that figure has now been wound back to 1.4%.

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