ASB predicts “mild” OCR increase
In its latest Home Loan Rate Report, ASB says it anticipates RBNZ monetary tightening to be “modest in relation to historical norms”. The bank said it expects central bank policy to limit uplift in local short-term rates.
The bank believes short-term fixed rates offer the best value for Kiwi home buyers in the current market, with competition between the banks helping to suppress rates. The bank’s team of economists said: “While the future is inherently uncertain, our forecasts suggest carded 1- to 2-year fixed rates are unlikely to approach the current floating rate until about 2020/2021.
“As such, splitting the mortgage into different terms, or a mix of floating and short-term fixed mortgages, is a strategy for keeping some flexibility while locking in some interest rate certainty,” the bank argued.
Like many of its rivals, the lender does not expect the Reserve Bank to raise the OCR rate until November 2019. However, ASB believes there is an outside chance things could accelerate if rate increases in other major markets, such as the US, feed through to New Zealand.
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