Reserve Bank Governor, Alan Bollard this morning made his last cash rate announcement for 2011, confirming no change to the cash rate which will remain at 2.5%.
In providing his policy assessment he made specific comment regarding the worsening world economy and the difficulties being encountered by a growing number of European economies. He also cited weakening economic activity which has now spread and includes the Asia Pacific region.
While the impact on New Zealand has so far been minimal business confidence has declined somewhat and investment spending is likely to remain weak for some time.
The domestic economy continues to expand, all be it at a modest pace. Inflation is now said to be within the Reserve Bank target range of 1 – 3% and the recent depreciation in the New Zealand dollar value has provided some much needed support for the export sector. Over time it is expected that the repairs and construction taking place in Canterbury will also provide a significant boost to the local economy.
The main threat to interest rates revolves around the cost of borrowing offshore and it now seems inevitable that funding costs for local Banks’ will increase in the coming year. How much and what impact that will have on domestic interest rates remains to be seen. There remains a high degree of uncertainty around the global outlook and there is a risk that conditions will weaken further. In the meantime there seems to be no upward pressure on interest rates.
Wednesday, December 7, 2011
Wednesday, July 27, 2011
Official Cash Rate remains at 2.5% - what does that mean for borrowers?
Official Cash Rate remains at 2.5% - what does that mean for borrowers?
It has been speculated that we will see some increase in the cash rate before the end of this year, some predicting as early as September. Mr Bollard confirmed that the economy is growing more rapidly than previously expected but he also expressed concern about the ongoing fragility of global financial markets and in particular uncertainty around the US Government’s debt ceiling.
While local inflation is higher than the Bank’s 1 to 3 percent target band much of this spike has been caused by last year’s increase in GST and the impact should therefore be temporary. Mr Bollard did comment however that provided the current global financial risks recede and the economy continues to recover he sees little need for the cuts made to the cash rate in March 2011 to remain in place for much longer.
So what does all this mean?
I think it confirms that we may see some increase to the cash rate by the end of the year, perhaps by as much as half a percent. I also think that increases to the cash rate, which will flow onto interest rates, are likely to be gradual, and therefore interest rates will likely rise slowly.
Fixed Interest Rates:
The window of opportunity to fix at current levels is certainly getting smaller. You can split your loan too which means put some on fixed and some on floating rate, this can help offset your risk a bit and not have all the eggs in one basket
While there are some very good shortish term fixed interest rates (say 2 years) available the problem may be when those rates roll over interest rates could be close to their peak again and that will make the next decision difficult to make.
Floating Interest Rates:
These remain at low levels although we should expect them to rise before the end of the year. It is impossible to predict what rates will go to but my best guess suggests they will rise by at least .50% by the end of the year. We are expecting the floating rate to remain at competitive levels however for some time to come yet.
It has been speculated that we will see some increase in the cash rate before the end of this year, some predicting as early as September. Mr Bollard confirmed that the economy is growing more rapidly than previously expected but he also expressed concern about the ongoing fragility of global financial markets and in particular uncertainty around the US Government’s debt ceiling.
While local inflation is higher than the Bank’s 1 to 3 percent target band much of this spike has been caused by last year’s increase in GST and the impact should therefore be temporary. Mr Bollard did comment however that provided the current global financial risks recede and the economy continues to recover he sees little need for the cuts made to the cash rate in March 2011 to remain in place for much longer.
So what does all this mean?
I think it confirms that we may see some increase to the cash rate by the end of the year, perhaps by as much as half a percent. I also think that increases to the cash rate, which will flow onto interest rates, are likely to be gradual, and therefore interest rates will likely rise slowly.
Fixed Interest Rates:
The window of opportunity to fix at current levels is certainly getting smaller. You can split your loan too which means put some on fixed and some on floating rate, this can help offset your risk a bit and not have all the eggs in one basket
While there are some very good shortish term fixed interest rates (say 2 years) available the problem may be when those rates roll over interest rates could be close to their peak again and that will make the next decision difficult to make.
Floating Interest Rates:
These remain at low levels although we should expect them to rise before the end of the year. It is impossible to predict what rates will go to but my best guess suggests they will rise by at least .50% by the end of the year. We are expecting the floating rate to remain at competitive levels however for some time to come yet.
Sunday, June 19, 2011
Auckland leading real estate recovery
Auckland is "clearly leading the real estate market recovery" with a 27% increase in written sales over the year to May 2011 according to the latest Harcourts Marketwatch.
The signs of a recovering real estate market continue to be supported by encouraging results says harcourts NZ CEO Hayden Duncan.
Link to this article to read further at www.landlords.co.nz/read-article.php?article_id=3981
The signs of a recovering real estate market continue to be supported by encouraging results says harcourts NZ CEO Hayden Duncan.
Link to this article to read further at www.landlords.co.nz/read-article.php?article_id=3981
Monday, June 13, 2011
As expected Reserve Bank Governor Alan Bollard kept his Official Cash rate at it's 2.5% record low, but rather than saying it will stay there for some time as he was saying in April, he says it will stay there for now.
A rise for the OCR is signalled around Dec 2011 to March 2012.
This statement however was made before the further earthquakes in Christchurch (we are thinking of you all) so we will see what commentry comes out over the next few days
A rise for the OCR is signalled around Dec 2011 to March 2012.
This statement however was made before the further earthquakes in Christchurch (we are thinking of you all) so we will see what commentry comes out over the next few days
Working for Families Budget changes
Of the 397,000 families affected by the 2012 changes, about 278,000 families earning less than $70,000 per year will receive more money.
About $110,000 mostly earning $60,000 a year will get less, including 7000 families which will no longer qualify.
Those earning $40,000 to $50,000 will get $2.68 per week less, and those earning $50,000 to $60000 will get $1.97 less.
About $110,000 mostly earning $60,000 a year will get less, including 7000 families which will no longer qualify.
Those earning $40,000 to $50,000 will get $2.68 per week less, and those earning $50,000 to $60000 will get $1.97 less.
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