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Short-term fixing still on the cards

Wednesday 22nd October 2008

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Property investors should fix their mortgages for six months to a year, as interest rates are likely to fall quite quickly, according to ANZ's Property Focus.

The bank's property gauges show affordability is improving though prices are still high relative to people's incomes. The cost and indebtedness measure remained high, according to the October report. Consents and house sales were treading water, with building applications dwindling while vendors have unrealistic price expectations.

"Mortgage rates are heading lower," ANZ Bank economists said. "Keep the duration of borrowing short, around six months."

Reserve Bank Governor Alan Bollard is expected to slash the official cash rate by 100 basis points tomorrow, the biggest cut since the measure was introduced in March 1999 to lift an economy that has been mired in recession this year. ANZ Bank predicts the OCR will continue to fall in 2009, to reach 4.75%.

Home-building approvals fell to a 22-year low in August, according to government figures on September 30.

Fletcher Building, the biggest construction company on the NZX 50 Index, fell 4.7% to NZ$6.15 today. Fletcher has declined 45% this year.

By Jonathan Underhill



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