News - 20 November 2006

Problem Profile

Where are Interest Rates and House Prices headed??

Something a bit different this time...

Last week I attended a seminar run by PMI Insurances, where Infometrics economists gave their predictions for house prices across NZ and interest rates in the coming 3 years. A quick summary...

• House prices will be fairly stable for 2007, with Median National Price Growth of 0.9%, and slight negative growth in Provincial Canterbury, Nelson/Marlborough, and Taranakai/Manawatu . Standout positive growth is 4.1% expected in Hawkes Bay.
• For 2008, the expected National Median Growth Rate is 2.3%, with Northland, Taranakai/Manawatu and Provincial Canterbury still having negative median price growth, but strong recoveries across the rest of the country. Nelson/Marlborough will be the best performer, with growth expected to be around 5.6%.
• For 2009, the upward pattern continues, with expected National Median Price Growth of 3.9%. Only Taranakai/Manawatu remains in negative territory, with strong rises across the rest of the country, including 5.5% growth in Auckland and 8.4% in Nelson/Marlborough!

I have detailed breakdowns of the supporting data behind each of these regions for those who are interested. Email me if you want more information - stuart@alphagroup.co.nz

• Economic Activity (Gross Domestic Product) growth rates for the country over the same period are forecast at 2.9% for 2007, 3.2% for 2008, and 3.6% for 2009 (against 2.1% for 2006). The unemployment rate will stay about where it currently is, and government spending will be less of a factor in the coming 3 years.
• 10 year (ie: long term) interest rates are forecast to be similar to where they are currently (around 6%), whilst 90 day bills are expected to drop to 7.4% in 2006/07, and to 6.5% in 2007/08 and 5.5% in 2008/09 . This will have a similar impact on floating mortgage rates, with 2009 rates expected to be around 7.6% (against 9.55% currently)

Again, I have detailed information behind these forecasts. Email me if you want to know more - stuart@alphagroup.co.nz

For a more detailed explanation of how these forecasts may impact YOU, CALL STUART NOW ON 021 676 747!!

Food for Thought

Blessed is he who speaks a kindness; thrice blessed is he who repeats it. Arabian Proverb

Interest Rate and Currency Comments

Mixed economic data suggests that the anticipated slow down in the economy may be some time away yet. Continued economic strength means that the Reserve Bank has not ruled out further increases in the Official Cash Rate. Any increases are likely to be small and probably short lived, but they are still a realistic possibility. Longer term rates are stable at present.

The kiwi seems to have settled into a pattern at present, hovering around 66 cents. There appears no reason for this to change in the next 2-3 months.

(See below for latest interest and exchange rates).

The Finance Markets

As of 8am on Monday 22 November 2006 the following Interest Rates applied:
Official cash rate 7.25% (stable)
90 day bill rate 7.62% (up)
5 year bond rate 6.17% (down)
NZ/US Dollar 0.6645 (down from 0.6742)

Current Range of Interest Rates for home and investment mortgages as at 22 November 2006.

Floating:
8.50 to 9.95% (stable)

Fixed For:
1 Year - 7.85% to 8.95% (stable)
2 Year - 7.85% to 9.25% (stable)
3 Year - 7.85% to 8.95% (up slightly)
4 Year - 7.80% to 8.34% (stable)
5 Year - 7.70% to 8.36% (up slightly)

For a complete table of interest and exchange rates, click here.

The information stated herein was correct at the time of release, but is subject to changes without notice.