Interest rate predictions for 2013
We ask economists for their predictions on when interest rates will start raising and to what level they will reach.
Friday, December 21st 2012, 1:15PM
by Susan Edmunds
Economists predict the official cash rate (OCR) will begin to rise as soon as next June, according to a survey by www.mortgagerates.co.nz.
Reserve Bank Governor Graeme Wheeler indicated at the most recent OCR announcement that he expected to keep the rate on hold until 2014. All but two of the seven economists surveyed expected the rate to have risen by next December.
UBS expects the first 25 basis point shift in June next year, JP Morgan and HSBC expect it in December, and BNZ and HSBC think it is likely to come in December.
Craig Ebert, of BNZ, said the bank had been picking that date for some time. He said BNZ was taking a firmer view of inflation over the medium term than the Reserve Bank.
By March 2014, all but one expect the OCR to be at least 3%.
Infometrics expects that the OCR will have reached 5.75% by December 2015, while GNZ expects it to reach 3.25% in September 2014 and stay at that level for the next year and a half.
BNZ says the rate will have reached 3.25% by March 2014, and will rise to 4.5% by December 2015.
UBS is picking the rate to reach 3.% by next March and stay there for at least a year.
Floating rate predictions
Floating rates will have risen to 8.6% in three years, one economist is predicting. Gareth Kiernan, of Infometrics, thinks floating rates will stay constant at 5.9% all next year but start rising next December. From then, the rise will be sharp, reaching 7.5% by the end of 2014 and then 8.6% by 2015.
He said by that point the global uncertainty should be diminishing and economic growth picking up. “It’s a case of starting to return monetary conditions to something more normal. Interest rates are unusually low and won’t continue forever.”
Paul Bloxham, of HSBC, predicts a more gradual increase, with floating rates inching up over 2013 and 2014, to reach 6.9% by December 2015.
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The OCR ain't going anywhere
The new Reserve Bank governor, Graeme Wheeler, predicts that the official cash rate won't by going anywhere until 2014.
This is clear from the 90-day bank bill forecast graph in the December Monetary Policy Statement. It shows clearly how over the past year forecast increases kept getting pushed down each quarter.
A year ago the bank was predicting the 90-day bill rate would be up at 4.00% by March 2014. That forecast was wound back to 3.3% in March, 3.2% three months later and is now down at 2.8%.
The good news for borrowers is that, asssuming things pan out as forecast, then home loan rates aren't likely to be going up any time soon either.