By Janine Ogier
Tuesday 6th December 2005
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Lenders will push floating home loan rates up in reaction to any rate hike on Thursday and fixed rates will follow them.
Since October when RBNZ governor Alan Bollard promised more tightening unless there was a noticeable moderation in housing and consumer spending, there has been little to stay his hand.
Some measures of weaker consumer confidence and quietening business spending intensions have come to light, but inflation expectations continue to rise, businesses are struggling to fill positions, the housing market is still buoyant and people are borrowing left, right and centre.
Most commentators forecast a 25-basis-point increase when the monetary policy statement is released at on Thursday, but there's a chance of a 50-basis-point hike.
The statement will be dissected for hints on what further tightening may be in store early in 2006 and whether the recent hawkish tone of central bank rhetoric continues.
Presently, market players are reluctant to give a January hike much credence, but that can quickly change once Bollard's comments are added to the forecasting mix.
"One could not rule out a 0.5% move on Thursday but the RBNZ would need to weight the kick in the head of the consumer factor against the risk of pushing the economy into a recession next year," Bank of New Zealand chief economist Tony Alexander says.
"We suspect the RBNZ will not stop depressing the brake until solid spending decline evidence is in hand. Hence, the risk of a January 26 OCR rise will remain open, though at less than 50% probability," he says.
Variable rates were stable in the last week ahead of Thursday's announcement, but some lenders moved fixed home loans further up.
Lenders announcing changes only made double figures in the two-year section of the market.
One-year rates still range from the 7.60% offered by Southern Cross to 9.10% from GEM Home Loans.
For two-year fixed terms, Housing Corp.'s 8.0% sets the lowest mark and Headstart's 8.95% records the top. There were 11 revisions higher.
Three-year rates vary from the 7.95% offered by Housing Corp. to Headstart and Westpac's capped rate of 8.85%. There were seven changes upwards.
In the four-year rates, four lenders hold the lowest position - Mortgage Finance, Loan Plan, Kiwibank and PSIS - at 7.95%, while New Zealand Mortgage Funds offers 8.36% at the top of the range. Four lenders increased rates.
For five-year fixed loans, the 7.07% offered by Housing Corporation, Kiwibank and Mortgage Finance marks the most attractive rate, while Gem Home Loans' 8.6% is the highest.
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