Current Interest Rates
Indicative rates current at 27 July 2015
|Fixed 6 months||5.39|
|Fixed 1 year||4.89|
|Fixed 2 years||4.69|
|Fixed 3 years||5.20|
|Fixed 4 years||5.40|
|Fixed 5 years||5.59|
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Interest Rate Outlook – July 2015
This Interest Rate Outlook has been brought to you by one of New Zealand’s Top Financial Journalists, Bernard Hickey:
It may be the middle of winter, but the housing and mortgage markets were anything but cold in July.
The outlook for interest rates for borrowers improved as further signs emerged that a slowing economy would force the Reserve Bank to completely reverse last year’s 100 basis points of Official Cash Rate hikes by the end of October.
Most economists now expect three more rate cuts in quick succession on July 23, September 10 and October 29. One year fixed mortgage rates have already fallen well below 5% in anticipation of the cuts. Economists revised their views after data was published showing slumping business confidence, slower retail spending growth, low inflation pressures, falling dairy prices and a weakening Chinese economy.
The Reserve Bank is under enormous pressure to release the shackles on an economy that produced annual inflation of just 0.1% in the March quarter. The bank is supposed to keep inflation around the 2% midpoint of its 1-3% target band over the longer run and Finance Minister Bill English has started making increasingly grumpy noises about Governor Graeme Wheeler’s under-performance of his Policy Targets Agreement.
“He’s been out of the zone for years now — below the midpoint for quite a long time,” English said in June.
“He’s meant to be following the Policy Targets Agreement. That’s the bit I look at and one day somebody will start asking the Minister of Finance questions about whether he’s actually following the agreement or not,” he said.
The housing market is in a much more buoyant state than the rest of the economy, at least for now and especially in Auckland. There are few signs yet that the measures announced by the Reserve Bank and Government in May to try to slow speculative and leveraged investment in Auckland by investors is having much impact. There are signs though that Auckland investors are spreading north of Orewa and South of the Bombay Hills.
REINZ reported Auckland’s median house price rose NZ$6,000 in the month of June to NZ$755,000 and was up 26% from a year ago. The median price for New Zealand excluding Auckland fell NZ$9,000 in the month of June to NZ$340,000 and was unchanged from a year ago.
Sales volumes in Auckland and Canterbury fell slightly in June once adjusted for the winter slowdown, but they were up 7% in the Waikato/Bay of Plenty region and 15% in Northland as Auckland investors spread their wings.
Demand for property in Auckland remains robust, thanks to still record-high net migration and a shortage of new properties. The Productivity Commission estimated in June that Auckland’s housing shortage could almost triple to 60,000 by 2020 if the current building plans and planning restrictions are left in place.
The key things to watch in July will be the Reserve Bank’s decision on July 23 and whether inflation starts to pick up after the recent rise in petrol prices and the fall in the New Zealand dollar.
The bottom line
- Auckland’s annual house price inflation rate rose over 25% in June and early signs are emerging it is spreading into Northland and Waikato/Bay of Plenty as investors look for better deals that they can still leverage up to buy without the Reserve Bank’s Auckland restrictions.
- House price inflation south of Waikato remains subdued with consumer and business confidence affected by the renewed slump in the dairy payout.
- Most economists now expect the Reserve Bank to cut the Official Cash Rate by as much as 1% to 2.5% by the end of the year as inflation remains well below the bank’s 2% target.
- New Reserve Bank restrictions on high LVR lending in Auckland and new Government requirements for rental property investors to declare IRD numbers to LINZ kick in from October 1.
(Interest Rate Outlook sourced from NZFSG Adviser Services, 14 July, 2015)