ANZ raises mortgage rates after Reserve Bank raises official cash rate to 0.5%
Robert Kitchin / Tips
The Reserve Bank withdrew some of its monetary stimulus measures despite the worsening Delta epidemic.
The Reserve Bank raised the official cash rate by 25 basis points to 0.5%, ending an 18-month period at the record rate of 0.25%.
ANZ, the country’s largest bank, announced within minutes that it was raising interest rates on its floating and “flexi” home loans by 0.15 percentage points.
The official exchange rate hike is the first since 2014, when OCR hit a post-GFC peak of 3.5%.
The rate hike had been universally expected by banking economists, who expect it to be the first in a series as the central bank seeks to control inflation.
* The official treasury rate is expected to rise 25 basis points on Wednesday
* Who will pay the price for the $ 54 billion spent on quantitative easing?
* The expected interest rate hike in October may not be fully allocated to mortgages until April
* Adrian Orr: Decision to maintain the official cash rate “literally in the uncertainty of the day”
The Reserve Bank said the current Covid-related restrictions had not “significantly changed the outlook for inflation and medium-term employment” as they delayed an expected interest rate hike in August, foreshadowing that inflation would temporarily exceed 4%.
“Capacity pressures remain evident in the economy, especially in the labor market,” the central bank said.
“A wide range of economic indicators underscore that New Zealand’s economy has performed well overall.”
The bank released a study in August that suggested it normally takes around six months for OCR increases to fully impact mortgage rates.
Further explaining its rate hike, the Reserve Bank said it expected economic activity to recover quickly “as alert level restrictions ease.”
“Recent economic indicators support this picture,” he said.
But the bank said its monetary policy committee was aware that the latest Covid restrictions had severely affected some businesses in Auckland and a range of service industries more broadly.
“There will be longer term implications for economic activity both nationally and internationally from the pandemic,” he said.
What does the official cash rate mean?
The Reserve Bank appeared to leave a lot of leeway over the pace of further rate hikes, saying “a further removal of monetary policy stimulus is expected over time, with future moves contingent on the outlook. inflation and medium-term employment “.
ANZ Director of Personal Banking, Ben Kelleher, said his own mortgage rate hike balanced his commitment to “supporting people in their homeownership aspirations” with rising OCR and financing costs wholesale from the bank.
ANZ said it would also increase interest rates on a number of savings accounts, but did not immediately say how much those increases would be.
The bank has been contacted for further details.
Kiwibank Chief Economist Jarrod Kerr expects Wednesday’s OCR hike to be the first in a series that would take OCR to 1.5% by mid-October. next year.
“We expect a thoughtful break of around 1.5%. Although the Reserve Bank signals a continuation of 2% in 2023, ”he said, calling the Reserve Bank’s path“ aggressive ”.
ASB chief economist Nick Tuffley said he saw the OCR climb to 1% in February and 1.5% by the end of next year.
The Reserve Bank had made it clear that it intended to continue lifting OCR over time, he said.
Tuffley described the central bank review as “more hawkish than kotuku (white heron),” referring to a speech last month by Reserve Bank Deputy Governor Christian Hawkesby who suggested it might choose your stages carefully.
ANZ sees OCR reach 1.5% by August thanks to a “cautious series of hikes”.
The embarrassing global theme was the risk of weaker than expected growth and higher than expected inflation, ANZ said.
This meant that the Reserve Bank “was heading down a stormy path,” he said.
“As has been the case for some time, the risks are skewed towards something to come to derail the Reserve Bank’s hike cycle before its completion, despite extremely strong inflationary pressures,” he said. declared.
National Party shadow treasurer Andrew Bayly said the increase in OCR amid a lockdown was “incredibly risky for the economy.”
“The Reserve Bank saw the cost of living rising too quickly and its hand was forced,” he said.