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Source: ONE News -
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Interest rates have been held today, which signals good news for mortgage holders.
The Reserve Bank governor Dr Alan Bollard announced this morning the Official Cash Rate (OCR) is remaining unchanged at 3%.
The rate has stayed the same since July this year and Governor
Dr Alan Bollard indicated the level could remain for a while longer
saying: "It's prudent to keep rates low until recovery becomes more
robust.
"Interest rates are now projected to rise to a more limited extent
over the next two years than signalled in September."
He still expects interest rates will increase "modestly" over the
next two years but admitted "the pace of economic growth appears to
have moderated".
Bollard listed lower corporate investment, weak consumer spending
and a flat housing market as cautionary factors weighing on the
Bank's mind.
However he also said rebuilding after the massive September 4
Canterbury earthquake will provide a boost to the national
economy.
"Higher export volumes and earthquake repairs are expected to push
GDP growth above that projected (earlier)," he said.
Better than expected growth numbers from the US and UK and
ever-increasing commodity prices were cited as positives.
Impact for borrowers
Although banks set their own interest rates, they are led by the
OCR - particularly on floating or variable rates - and often are
unwilling to increase those rates independently.
The main banks' floating rates are currently between 6.15-6.5%
while two-year fixed rates are around 6.6%.
Business commentator Fiona Rotherham from Fairfax Media says the
situation suits floaters right now.
"I think if you are on a floating rate there is absolutely no hurry
to move to a fixed rate at all," she told NZI Business today.
She says economists are divided as to whether rates will go up in
March or June next year.
The Reserve Bank's statement today suggests a longer timeframe may
be likely.
New cycle
AXA Chief Economist Bevan Graham, told TVNZ this morning
that New Zealand could be entering a new phase for interest
rates.
He believes the Bank needs to "stay in front of the inflation
problem" rather than trying to rein it in from behind like when the
rate hit 8.25% in 2007-08.
"There is an opportunity here to lock in a low interest rate cycle.
The nature of the recovery is different this time, it's not being
lead by consumption (or) housing. If they do stay in front of
inflation, we
could lock in a lower rate curve," Bevan said on NZI
Business.
The next OCR announcement is due on January 27 next year.
