By Duncan Garner
The Reserve Bank Governor left the Official Cash Rate unchanged at 2.5 percent today.
But for those prepared to analyse Alan Bollard's comments there were some clues about the future. Commentators have picked up on this suggesting home owners are better off with a floating mortgage than a fixed one.
Financial editor Bernard Hickey says floating mortgage rates will rise gradually over the next two years, “probably starting as early as December”.
The record low interest rates are still on offer at all the banks and will be for months to come, so floating mortgage rates will stay as they are. Kiwis have flocked to the low floating rates over the past two years.
Of the $168 billion of mortgages in the market, $88 billion, or 53 percent, are now on floating rates and that is the highest ever number.
Forty-seven billion dollars is tied up in short term fixed rates which will all come off by April next year.
Mr Hickey says Kiwis have only one option: "You may be better off to stay floating and just see it increase slowly over time.”
And with so many Kiwis now on floating rates, moving rates upwards will have an immediate impact on consumer spending and reducing inflation.
Dr Bollard has hinted future interest rate rises do not have to be sharp, sudden and as often and that's good news for borrowers.
The Government will also be relieved with Mr Bollard leaving mortgage rates as they are. His signals today mean it is most unlikely there will be any rate rises before the election, meaning John Key and Bill English can trumpet the low interest rates during the campaign.
Labour will of course say that is because the economy is flat.
3 News