The Official Cash rate was left unchanged last week at 3%.  The Reserve Bank Governor noted that the economic outlook had weakened since his last statement in June.  As a result he also indicated that the pace and extent of future rises may be moderated. We remain pretty comfortable with sitting on a floating interest rate as long as it suits individual circumstances.

The banks will be rubbing their hands with glee over the collapse of South Canterbury Finance.  One could safely assume that a fair chunk of the $1.7 billion cheque that is being written out will find its way to the banks on term deposit.  An amount of stimulus to the economy could also ensue as we wouldn’t be surprised to see a few taking the opportunity to upgrade the car, or replace the wonky freezer, and put the rest on term deposit.

In a further easing of home loan credit criteria, ASB Bank recently announced it was back in the home loan lending market up to 95%. They had been camped at the 80% mark since October 2008, so the move is pretty significant.

Have a great week. 😛

The OCR was left unchanged at 2.50% today. The Reserve Bank Governor went on the attack in an attempt to hammer down the NZ dollar and to press interest rate market players to reduce their expectations that the OCR would be raised in the very near future.

“In contrast to current market pricing, we see no urgency to begin withdrawing monetary policy stimulus, and we expect to keep the OCR at the current level until the second half of 2010.”

He managed to obtain both, although for how long remains to be seen. The dollar was down against most of our trading partners and interest rate swaps were also down. At the time of writing the 1 year fixed interest rate swap was down from 3.59% to 3.47% and the 2 year from 4.68% to 4.52%.

The ASB Bank, in a market commentary released this afternoon, is forecasting the first OCR rate hike to occur in April 2010. They have indicated an expectation that the 1st 3 increases will be moves of 0.50%. Based on this one could expect very rapid rises in home loan floating interest rates next year.

BNZ and ANZ have announced their annual results over the past two days. They make for some interesting reading (for a slightly sceptical mortgage broker ;-)) once you ignore the headline figure. 

The ANZ Chief Executive has been quoted as saying the decrease in net interest margins was as a result of “….intense deposit competition and higher wholesale funding costs, as well as the timing lag in re-pricing fixed rate lending and the increased costs from early repayments of fixed rate mortgages”.

Her boss in Australia had a slightly different take. “We have a great NZ franchise but banks in NZ seem to be doing their best to price themselves out of business and the regulators seem intense on finishing the job.”

http://www.theaustralian.news.com.au/business/story/0,28124,26276257-36418,00.html