OCR lower, mortgage rates higher

Most local news was overshadowed by the aftermath of the US election yesterday, but the Official Cash Rate was reduced to a record low of 1.75%. This was signalled and expected.

However mortgage rates have not followed suit, in fact some have started to rise.

ODT: OCR cut, but lower mortgage rates unlikely

As expected, the Reserve Bank cut the official cash rate to a record low 1.75% yesterday, with expectations the country’s stubbornly low 0.4% inflation rate will rise to the midpoint of its 1%-3% target.

The quarter point cut is not expected to be passed on in lower mortgage rates by banks, which are having to borrow money offshore at higher rates, partly because of the lack of deposits domestically.

Mr Wheeler said his current projections, including yesterday’s cut, would see economic growth strong enough to have inflation settle near the middle of the 1%-3% target range.

“Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.”

On the question of the OCR being cut, but not passed on to mortgage borrowers, BNZ external relations consultant Mac Dalton said it was timely to remind borrowers that interest rates were not solely linked to the OCR.

One source of funding for banks is local deposits, and at present there were more people wanting home loans than there were people saving, Mr Dalton said.

“So to encourage and attract more deposits, people’s savings and terms deposits, we need to pay a sharper return to savers,” he said.

Also the banks still needed overseas funds to fill the gap, and the cost of those funds remained volatile, he said.

So while it looks like mortgage rates are unlikely to be coming down any further we still benefit from record low rates.

Leave a comment

17 Comments

  1. The ultimate irony of the Friedmachivellian, monetarist, financial elite obsession with controlling inflation – based on the essential ethical discrepancy that ‘property in the soil’ is removed from the equation – is that when inflation gets really low it subverts the very process that brought it about …? It reaches a line of ultimate inconsistency …

    “Mac Dalton said it was timely to remind borrowers that interest rates were not solely linked to the OCR.”

    Really!? Except if the OCR increases, mortgage rates instantly and automatically follow …

    ” … mortgage rates are unlikely to be coming down any further [but] we still benefit from record low rates.”

    Really!? How exactly does that work? Because property in the soil keeps on freely inflating ….Right?

    Or do we generally benefit from economic growth? From more jobs, increased wages, more job security, better working conditions, shorter hours, more leisure and disposable income with which to enjoy it … ? It just trickles on down … Right?

    Reply
  2. Gezza

     /  11th November 2016

    I’m not keen on that idea, but I often feel like I’m paying for Nationals.
    Why can’t they all be funded out of Powerball jackpots over $10m?

    Reply
    • PDB

       /  11th November 2016

      Lotto – the tax of the poor? Now don’t get me onto how lotto is heavily promoted as being ‘good’ but in fact takes far more money from poor people in this country than a few extra jackpot machines at a casino will ever do…….

      Reply
      • Gezza

         /  11th November 2016

        You’re right. What about a special tax for rich people only? They probably wouldn’t miss a few roubles?

        Reply
        • PDB

           /  11th November 2016

          I think they already have that? It’s called income tax.

          Reply
          • Gezza

             /  11th November 2016

            🤔 😠 I’ll see what other ideas I can come up with. 👍

            Reply
            • PDB

               /  11th November 2016

              Treasury: In New Zealand the top 40% of households by income are the only ones that pay any income or GST over and above what they receive in return through the welfare system and health and education benefits in kind.

            • Gezza

               /  11th November 2016

              How much more do they earn from all sources than beneficiaries and low to medium income working households?

            • PDB

               /  11th November 2016

              Here Gezza, hold this end of the string and I’ll see how far it goes…….

            • Gezza

               /  11th November 2016

              Righto. I’ve got my end of the string, PDB. Put the can on your end up to your ear.

              I like our scheme of taxpayer funded healthcare and education PDB.
              I think it’s a good idea. Lots of countries do don’t they? Look at the crappy system they have in the States. Everybody’s creaming it except the poor folk who earn peanuts or whose jobs went up the wazoo with the offshoring of jobs by rich pricks.

              This “40% pay all the income tax, really” bizzo. Are you one of the 40%?

              Are you telling me 60% of the population have so little income they need help from the government? How the hell did that happen?

              The 40%ers get access to free education and health care and the benefits from pharmac too don’t they? If they want to?

              If you take off education and health costs what does the percentage look like?

  3. PDB

     /  11th November 2016

    Personally I’ve been a taxpayer since the age of 18 and never been on/claimed any sort of benefit except a couple of weeks ACC……..also a small business owner so you could say I’m one of 40% in the positive for tax paid.

    Yes, even taking into account GST (which logically richer people pay more of anyhow as they have more disposable income to spend) 60% of New Zealander’s claim back from the govt more than they pay to the govt each year.

    The three largest areas of total Crown expenditure for the 2015/16 financial year were:
    *Social security and welfare: $28.9 billion
    *Health: $15.2 billion
    *Education: $13.8 billion

    A large chunk of rich kids likely to be in private education and those families are also more likely to hold private health insurance – so perhaps the 40% reduces even more if taking health and education into account?

    Reply
    • Gezza

       /  11th November 2016

      What are all the different components of that Social Security & Welfare amount?

      Why should you need private health insurance? Is it to get treatment straight away instead of languishing on waiting lists? Isn’t it the same surgeons and specialist doing private ops & consultations as in the public system? So If there are waiting lists doesn’t that mean the public system must underfunded?

      If the rich chunks want to send their kids to private schools I don’t mind though.

      Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s