We have just gone through a mortgage rate hike set that saw 3 to 5 year fixed rates rise and the rate curve steepen.
But yesterday's RBNZ OCR review has changed the landscape again, if the swap markets are any early indication.
Wholesale swap rates across the curve rose sharply yesterday as markets came to the realisation the RBNZ is preparing for an OCR hike earlier than previously reckoned.
If it does raise rates in early 2014, New Zealand will be the first floating currency economy to do so since the GFC.
And a rise will contrast us with Australia who are widely expected to continue cutting rates.
New Zealand official rates above Australia reverts to the long-run 'normal' situation.
Swap rate benchmarks for one year rose 7 bps yesterday following the RBNZ announcement. This is the largest one-day rise since June 2012.
The same change showed by for the two year swap rate as well.
For 3 to 5 years, the jump was twice as much, echoing what happened about a month ago which resulted in the most recent fixed rate mortgage hikes.
On their own, these one-day changes are unlikely to mean fixed mortgage rates will rise immediately in response, although discounting may become more limited.
But if they are an early indicator of future rate directions, carded fixed mortgage rates could be in for another round of increases, this time across the board.
And the recent rapid shift to fixed rates away from floating may be temporarily reversed until the OCR actually does change.
(Keep this in mind: Swap rate trends have shown a weak pattern in the past of rising through Thursdays and then trending back from there, so the observations above need to be seen in this light.)
See all advertised mortgage rates here.
| 1 yr | 2 yrs | 3 yrs | 4 yrs | 5 yrs | |
 |
4.95% | 5.65% | 6.05% | 6.30% | 6.60% |
 |
5.25% | 5.65% | 6.05% | 6.30% | 6.60% |
| BNZ | 5.25% | 5.65% | 5.89% | 6.30% | 6.60% |
| Kiwibank | 4.89% | 5.50% | 6.05% | 6.30% | 6.60% |
 |
5.19% | 5.65% | 6.04% | 6.30% | 6.60% |
| Co-op Bank | 4.94% | 5.50% | 5.95% | 6.15% | |
| HSBC Premier | 4.99% | 565% | 6.05% | 6.30% | 6.60% |
| SBS / HBS | 4.95% | 5.25% | 5.65% | 5.99% | |
 |
4.88% | 5.50% | 6.05% | 6.30% | 6.60% |
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38 Comments
It's only the longer term wholesale rates that have been rising significantly. Don't expect to see any term deposit rises in terms of 1 year or less.
Also need to factor in the impact of LVR caps and the possibility of lower market lending growth and subsequent reduced funding requirements.
Okay , so this is understandable , but fixing for 5 years at 6,6 % is still very cheap money by any measure of historical averages
Ben Bernanke has signalled that the QE program will be reigned it , so its a given that money will become more expensive to borrow
The talk of tightening of monetary policy in the next 2 years will impact on rates .
Historical averages are now completely irrelevant.
NZ is not returning to an OCR of 5 - 7% in the next 5 years. Maybe start your new chart from 2009.
NZ is still rrunning a relatively high interest rate policy. This is designed to kill off most private SMEs, destroy provincial regions, & force all economic activity to come under global corporate entities.
The only way rates will go up in a sustained fashion aka history is with growth, and that wont happen,
http://peak-oil.org/2013/05/looking-back-at-peak-oil/
So that leaves the human aspect, and frankly after 5 years of watching this debacle, human "behaviour" in finance could cause anything.
Right now if rates rise we'll go into a Depression like teh 1930s IMHO, not something to hope for Id suggest.
regards
There was a comment by a bank CEO? this or last year, he said they simply followed the OCR rate in setting mortages no matter what the wholesale rate was they were getting, so the RB took the flak. He was now concerned however that the OCR could drop but not thier wholesale rates, so they'd cop the flak.
My statement is based on this....so of course bank economists want the OCR up....its their profit thats at stake. On top of that our hosuing market looks over-heated, thus lenders would want a higher rate to cover the risk....
regards
I didn't see the quote Steven but certainly in the last few years bank funding costs haven't been solely aligned to the OCR. The one thing I do know however is that bank economists aren't told what to forecast because of what might or might not be good for bank profitability
Unless you're a shareholder in any of those banks !
...... in which case a different set of words from the dictionary would suffice : Dividend / Fair / Profit / Gain / Return on Equity / Satisfied Customers / Enabling Credit / Promoting Business / Providing Capital ....
....and quite a few other words in the dictionary ..
The fine property purchasing peoples of New Zealand go voluntarily to their banks ..... no one strong-arms them ....and they happily avail themselves of the services and credit provided therein ...
.... the bank's are happy / shareholders happy / customers happy ....
Only a few malcontents here at interest.co.nz fail to enjoy the sheer beauty of the marketplace in action .....
Stated simply: the modern monetary system based on "promises to pay" only works as long as nobody actually demands payment, and especially not all at the same time which is what happened in 2008. It also explains why the only way to mask the fundamental insolvency of the modern monetary experiment, is to keep creating money-equivalent credit at all times and costs.
In short: a system based on faith.
In even shorter: a religion.
Any stop to such "money creation" and the false idol of monetary voodoonomics falls. Suck it up
Thank you Grant. Asked you this the other day but youwere too busy being the bank PR man to get it. Using your info as above
Four billion profit plus. Thats profit not income.
Four million people.
So thats one thousand dollars profit -mimimum-per person.
Consider many or most even, are not big five customer in any significant way.
Children etc. or just have a single transactional account.
That one thousand profit becomes what? Lets agree on two.
In a low income country.
Your turn to come up with some substance Grant.
What is the national income per head Grant? And what proportion is one Grand of that???
Lets see what a bank apologist makes of that calculation. - You wont go there of course.
To me. You are bumping into trees- but can't see the forest.
Again totally irrelevant KH. You said banks make excessive profits, and I was curious as to how you measured that. You have come back unbelieveably saying on a profit per person basic - so that makes a business earning only $50 per person less "excessive" e.g. the corner dairy.
Let me do one of those calculations for you, the banks invest $25,200,000 of capital in NZ to service their customer needs and based upon our 4,400,000 population (yes, including children) that calculates out to $5,600,000 of capital invested by the banks shareholders in this country for every man, women and child. And understand that there is plenty of pressure for the captial (i.e. the generates services for NZers) to go elsewhere (e.g. the developing banking markets in asia) if they can't get an acceptable return - would you not do the same if you owned that capital ?
But since you asked for information you will have looked at (and ignored) the return on equity graph, and saw that the banks sit somewhere in the middle of it (by the way would you prefer to have your money with them if they sat somewhere towards the end ?). Why aren't you focused on the fat producing 32% return of Restaurant Brands, or the 28% return Hallisteins make selling you obviously over-priced clothes, of the 25% Telecom make selling you obviously over-priced services, or the 25% return Michael Hill Jewerller surely selling you cheap jewellery at ridiculous inflated prices ? No lets pretend the banks 8-16% returns are the excessive ones because I see a big notional profit number which is all I can understand.
Understand, banks are massive businesses in any economy because they are funding a large portion of it. They invest massive amounts of capital and expect to get a return or that capital goes elsewhere. They are investing in peoples houses and businesses, most assets in any country, and you don't think that's going to be a big notional number.
And I'm the one that can''t see the forest for the tress, yeah forest,
Think about it Grant. I think you think the accounting is real.
$5,600,000.00 invested by banks per person. Say.mmmh $25million invested for the average family. And considering there are other investors in what happens here.
Lets say $50 million invested for each of those 'average' families. More probably using your approach.
Looked about. Where is that massive investment.
Not there. Even counting infrastructure
I know you believe it but
Cheers
No just a ridculous division error FH apologies. I should have thought about the number a little more but the point is the same, its alot of capital applied per person per household and therefore the income and profit generated from it is going to be large which is the point....without checking your calc on profit per person, if its $1,000 per person and the capital is $5,600 per person, a return in the mid-teens is about right - Restuarant Brands would makde $1,800 and Hallesteins $1,400 - are they ok then and is the banks excessive and should pull capital out and lend less to indiduals and businesses and reduce services?
Fair point about the other industries Grant.
Return on Capital doesn't make much of an argument tho.
I will never work it out for banks - But there are some very imaginative valuations of assets out there.
Electricity companies. Airports.
They go the other way from you. "We made a bigger profit, so our asset is worth more"
Then magically. "We deserve our high prices, because we have a lot of capital invested"
Huuumh. Thats when one needs to step out of the morass and take an overview.
Profit per person in pop. Profit per worker. Margin per item sold etcetc.
Cheers
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