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Interest rates to stay low for some time: Economists

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Fuseworks Media
Fuseworks Media

Home loan borrowers can expect low interest rates for a while yet, if economists polled by www.mortgagerates.co.nz are correct in their predictions.

And that is likely to keep the heat in the New Zealand housing market, in Auckland in particular.

The website asked 15 New Zealand economists what they thought would happen at the OCR announcement on Thursday.

It is Reserve Bank Governor Graeme Wheeler’s second in the job and will be watched closely as it include his first Monetary Policy Statement.

All the economists expect the rate to be kept at 2.50%.

They said economic conditions, globally and nationally, hadn’t deteriorated to the point where a cut was likely, although there is a view that there is a 30% chance there will be a rate cut in the next 12 months.

"On balance, all expect the next move in the OCR to be up, by 25 basis points, although the market is forecasting that a cut may still be on the cards," mortgagerates.co.nz Managing Director Philip Macalister says.

But the soonest anyone is expecting an increase is March 2013, when TD Securities predicts such a move.

The economists from all the major banks think the increase will happen much later.

"Westpac and ASB predict a rate increase in September next year. BNZ thinks it won’t happen until December and ANZ doesn’t think there will be a change until 2014," Mr Macalister says.

Home loan interest rates are the lowest they have been in 48 years, and that was fuelling the housing market more than problems such as a lack of supply.

But factors such as a strong dollar, higher unemployment and low inflation made an interest rate hike unlikely at this point.

Mortgagerates.co.nz provides a comprehensive and sortable table of home loan rates. Mr Macalister says that lenders have made very few changes since the previous OCR announcement six weeks ago despite competition amongst the banks being intensely strong.

"The main changes have been tweaks to some of the special rates on offer," he says.

"While floating rates are still the most popular at the moment fixed rate loans up to two years are generally cheaper options for borrowers."

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