Interest rate increases?

[Toaster]

So what is going to happen?

Is Mr Cullen going to increase the interest rates or not...

Views and opinions on the matter are all welcome!!!

It's Dr Bollard. Cullen (sadly still) is Finance Minister.

The OCR has risen to 8%.

[bane]

dont care...i locked in 7.8% for five years about 18 months ago....

nuts to you mr bollard....

well done on timing etc, but I think you've missed the point here...

Are you about to rush out and take a 100% loan and buy an investment property with interest rates of ~10%? No? then he's achieved what he wanted.

i.e. please (aka "FFS") stop borrowing money.


Unfortunately, its a big hammer that adversely affects investment in productive parts of the economy, but its the only hammer he has.

Some targeted measures at the housing market would help him - like a capital gains tax on investment properties, reduced tax effectiveness of investment properties.... but as it stands, he has no choice but to dampen the whole economy.

Just imagine if NZ invested its money in businesses, technology and R&D, instead of property... we might even have incomes that match first world countries!

[MisterD]

It's Dr Bollard. Cullen (sadly still) is Finance Minister.

The OCR has risen to 8%.

Ah yes, our esteemed History Professor....telling us not to spend money and all the while purchasing red tape for the health service by the container load.

[degrom]

well done on timing etc, but I think you've missed the point here...

Are you about to rush out and take a 100% loan and buy an investment property with interest rates of ~10%? No? then he's achieved what he wanted.

i.e. please (aka "FFS") stop borrowing money.


Unfortunately, its a big hammer that adversely affects investment in productive parts of the economy, but its the only hammer he has.

Some targeted measures at the housing market would help him - like a capital gains tax on investment properties, reduced tax effectiveness of investment properties.... but as it stands, he has no choice but to dampen the whole economy.

Just imagine if NZ invested its money in businesses, technology and R&D, instead of property... we might even have incomes that match first world countries!

I think it 's all bull!!!!

Say your house hold earns 50k a year. They will never be able to buy a house.(EVER!!!)

Okay,you can save for a nice deposit... 10 years!!!!

The averages house doubles it values every 7 years. (2x today's deposit).

I have a nice suggestion. Politicians and governments should take responsibility for their actions. If they screw up the Kiwisaver I want them hanged!!!

And if you are to lazy to vote then you should shut up!!!!

[yod]

well done on timing etc, but I think you've missed the point here...

Are you about to rush out and take a 100% loan and buy an investment property with interest rates of ~10%? No? then he's achieved what he wanted.

i.e. please (aka "FFS") stop borrowing money.


Unfortunately, its a big hammer that adversely affects investment in productive parts of the economy, but its the only hammer he has.

Some targeted measures at the housing market would help him - like a capital gains tax on investment properties, reduced tax effectiveness of investment properties.... but as it stands, he has no choice but to dampen the whole economy.

Just imagine if NZ invested its money in businesses, technology and R&D, instead of property... we might even have incomes that match first world countries!

no...you're confused over which point i'm aiming for...

[Hitcher]

So what is going to happen?

Is Mr Cullen going to increase the interest rates or not...

Views and opinions on the matter are all welcome!!!

1. Mr Cullen doesn't increase interest rates. Reserve Bank Governor Alan Bollard is the only person who can influence the Official Cash Rate (OCR).

2. Dr Bollard's performance agreement says he is to keep inflation under 3% per annum. He has few levers available to him to achieve this target. The most effective, albeit the bluntest of these levers, is the OCR.

3. Dr Bollard this morning decided to increase the OCR from 7.75% to 8.00%.

4. Because the OCR influences the price banks have to pay for their money, their interest rates will rise accordingly, particularly their lending rates.

5. There is at least one generation of New Zealanders who have no memory of the inflation rates of the 1970s and early 1980s that nearly killed New Zealand. When Mrs H and I bought our first property in 1987, we were paying 18% on our first mortgage and 22.5% on our second. Hire purchase and credit card interest rates at that time ranged from 33-35%.

6. The issue is whether or not you agree with the Government's objective of keeping inflation below 3%. If you agree, you shouldn't mind your costs of borrowing increasing. If you disagree, you shouldn't mind paying increasingly more for the goods and services you procure.

[steved]

dont care...i locked in 7.8% for five years about 18 months ago....

nuts to you mr bollard....

Group hug!

I fixed for five years at 7.99% 6 days ago! We locked that rate at just the right time.

[steved]

1. Mr Cullen doesn't increase interest rates. Reserve Bank Governor Alan Bollard is the only person who can influence the Official Cash Rate (OCR).

2. Dr Bollard's performance agreement says he is to keep inflation under 3% per annum. He has few levers available to him to achieve this target. The most effective, albeit the bluntest of these levers, is the OCR.

3. Dr Bollard this morning decided to increase the OCR from 7.75% to 8.00%.

4. Because the OCR influences the price banks have to pay for their money, their interest rates will rise accordingly, particularly their lending rates.

5. There is at least one generation of New Zealanders who have no memory of the inflation rates of the 1970s and early 1980s that nearly killed New Zealand. When Mrs H and I bought our first property in 1987, we were paying 18% on our first mortgage and 22.5% on our second. Hire purchase and credit card interest rates at that time ranged from 33-35%.

6. The issue is whether or not you agree with the Government's objective of keeping inflation below 3%. If you agree, you shouldn't mind your costs of borrowing increasing. If you disagree, you shouldn't mind paying increasingly more for the goods and services you procure.

Agreed. There needs to be more instruments to attempt to control inflation. The OCR tool is looking like it is losing power and interfering with other economic trends with the high OCR rate maintaining a very high dollar.

[Beemer]

Group hug!

I fixed for five years at 7.99% 6 days ago! We locked that rate at just the right time.

Ours was 6.99% for four years and when we refixed it we worried about whether to fix it for a long period again or not, but in the end we went for seven years at 7.77% so we're pretty happy with that. Less than one percent more than what it was before and less than the latest offerings, that's for sure.

[bane]

no...you're confused over which point i'm aiming for...

cool, interested in what I missed...

Bollard cant undo whats already done (i.e. you've already bought a house and locked in a good rate), but he can put measures in to stop others following. i.e. increase the cost of borrowing until you cant afford it.

no one should bemoan the fact that someone wants the security of owning their own house - and for the majority of people that means borrowing.
These people are caught in the crossfire when they renegotiate their mortgage - but the up side for Bollard is they feel less rich and hopefully reduce their spending.

His real target is investment property. Unfortunately for the overall economy, due to massive capital gain over the last 4 years, a shed lot of borrowing has gone into "investment" properties, which actually lose their owners money day to day (rents dont cover costs), instead owners are relying on continued capital gain.

Bollard could let this go unchecked, but as Hitcher has already pointed out, inflation rates of >10% do the economy far more damage, than tempory high interest rates.

[degrom]

cool, interested in what I missed...

Bollard cant undo whats already done (i.e. you've already bought a house and locked in a good rate), but he can put measures in to stop others following. i.e. increase the cost of borrowing until you cant afford it.

no one should bemoan the fact that someone wants the security of owning their own house - and for the majority of people that means borrowing.
These people are caught in the crossfire when they renegotiate their mortgage - but the up side for Bollard is they feel less rich and hopefully reduce their spending.

His real target is investment property. Unfortunately for the overall economy, due to massive capital gain over the last 4 years, a shed lot of borrowing has gone into "investment" properties, which actually lose their owners money day to day (rents dont cover costs), instead owners are relying on continued capital gain.

Bollard could let this go unchecked, but as Hitcher has already pointed out, inflation rates of >10% do the economy far more damage, than tempory high interest rates.

Makes sense!!!

Compared to capital gain over the last few years... How has the inflation picked up???

[yod]

cool, interested in what I missed...

Bollard cant undo whats already done (i.e. you've already bought a house and locked in a good rate), but he can put measures in to stop others following. i.e. increase the cost of borrowing until you cant afford it.

no one should bemoan the fact that someone wants the security of owning their own house - and for the majority of people that means borrowing.
These people are caught in the crossfire when they renegotiate their mortgage - but the up side for Bollard is they feel less rich and hopefully reduce their spending.

His real target is investment property. Unfortunately for the overall economy, due to massive capital gain over the last 4 years, a shed lot of borrowing has gone into "investment" properties, which actually lose their owners money day to day (rents dont cover costs), instead owners are relying on continued capital gain.

Bollard could let this go unchecked, but as Hitcher has already pointed out, inflation rates of >10% do the economy far more damage, than tempory high interest rates.

the point i was making was simply that the rate increase was of no consequence to me (cost wise) in the next few years anyway but it might screw my capital gain, the bastard!!


the govt has made noises about additional legislation re tax on investment properties - this is good imo, demand will decrease somewhat but gains will still be there for the longer term investor

"which actually lose their owners money day to day (rents dont cover costs), instead owners are relying on continued capital gain" - thats kind of the point; anyones cost of ownership tends to be a damn sight higher than renting so the ONLY point to owning property is the anticipated CG

all the govt needs to to do is make other investment options more attractive and educate investors about them (yeah simple i know...if only you all voted for me )