Statement made by Anthony Byett, Chief Economist, ASB Bank
Variable mortgage interest rates should rise further than the 0.25% rise in the Official Cash Rate announced by the
Reserve Bank on Wednesday.
The 90 day-bank bill rate, which sets the pricing of variable mortgage interest rates, has risen by just over 0.5% over
the last 2 months. This means the variable interest rate charged by major banks should realistically move to around 7.2%
p.a. from its existing 6.70%p.a.
However, it is difficult to see banks moving by such an extent given the lesser increase in the Official Cash Rate, but
they are likely to settle somewhere between the two points.
Some moderate dampening of housing market confidence can be expected as a result of these and pending future interest
rate increases, although the effects may be difficult to gauge given that housing market activity seasonally declines
post-Easter in any event.
Fixed term mortgage interest rates have now broken through the 7.00% p.a. barrier, but still remain low by historical
terms.
Ends