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Aussie home loan rates to go up

April 7th, 2010 | Author:

Glenn Stevens, the Governor of the Reserve Bank of Australia (“RBA”) has just raised the Australian Offical Cash Rate 0.25% to 4.25%.

This is important to New Zealand as sadly we do tend to try to follow our big brother country and closest neighbour, Australia.  Now we don’t have the same pressures as Australia do in terms of our economy still struggling a little bit.  We are out of recession, but business is hardly booming.  Unemployment is still high, and house prices are not taking off, and moving upwards as they did in 2009.

As a result on 29 April, our Reserve Bank Governor Alan Bollard will in all likelihood leave our OCR unchanged at 4.25%.  On 10 June currently I am 75% confident that he will also leave the OCR unchanged.  Unfortunately our economy is not currently as good as Australia’s economy, and nor has it been for quite a while.

RBA Governor Stevens was worried last week that house prices were “getting too high”, and in response to questions about inflicting pain on home owners and property investors through causing higher short and medium term rates:

Interest rates to most borrowers nonetheless have been somewhat lower than average…

With growth likely to be around trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average.”

New Zealand is very much a different country to Australia, and currently we have few inflationary pressures, cyclically high unemployment and very low house price growth, and an already high currency (higher interest rates tend to mean overseas investors buy NZ Dollars to invest for the good yields they can get), we have far less pressure on us to raise our interest rates.

See the NZ Herald article for more details.

Posted in General, Interest Rates & Loans | Tags: , , , , , ,

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