By Janine Ogier
Tuesday 11th October 2005
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More lenders increased rates across the fixed rate market last week, with one- and two-year rates again recording the most changes.
With the financial markets pricing in a 25-basis-point rate hike on October 27 and more economists backing that sentiment, a Reserve Bank rate increase will be no surprise.
Bank of New Zealand chief economist Tony Alexander advises borrowers to get a two- to three-year fixed rate, or even a four-year rate.
"The drift in all these rates will be up and there is nothing at this stage which would allow one to take a reasonable punt on when the next cyclical low in fixed rates will be," he says.
BNZ unveiled its "we'll beat it" spring campaign recently and pledged to better any fixed home loan rate from a big bank.
It's hoping to match the stellar mortgage business it attracted with its aggressive campaign last year.
Deutsche Bank this week changed its view on monetary policy. "With market pricing now, finally, endorsing the RBNZ's inflation concerns - a notable and enlightening change of view in itself - we look for the RBNZ to implement a 25-basis-point hike in the official cash rate at the coming interim review in late October and possibly a further 25-basis-point hike at the December monetary policy statement," senior economist Darren Gibbs says.
The quarterly survey of business opinion is released today and will be key in the Reserve Bank's decision-making process.
"A weak QSBO outturn may see a re-evaluation by the market of the odds that further policy tightening is imminent," Westpac economists say.
"We see the survey as the main make-or-break of the likelihood of the RBNZ acting this month."
In mortgage news, many lenders altered fixed rates upward in the past week.
One-year rates now range from the 7.60% offered by Southern Cross to 8.47% from New Zealand Mortgage Loans.
Ten lenders announced fixed rate increases.
Two-year rates now vary from Housing Corporation's 7.55% to the 8.75% offered by Headstart. There were 11 rises.
In the middle part of the market, three-year rates range from the 7.40% offered by PSIS to Headstart's 8.55% and eight lenders announced increases.
Seven lenders raised four-year rates and they now vary from 7.35% at PSIS to 8.05% at New Zealand Mortgage Funds.
The sole decrease of the week was in the five-year rates, where ASB cut its rate to 7.40% from 7.50%. This is in marked contrast to Kiwibank, which put its five-year rate up 25 basis points to 7.40%. It was only six weeks ago that it was offering this term at 6.99%.
The five-year rates now begin at the 7.30% offered by BankDirect to Gem Home Loans' 8.00%. Seven lenders raised this rate.
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