A flurry of increases for fixed rate mortgages shouldn't tempt borrowers to make hasty decisions, says the Real Estate Institute.
Mortgage lenders have been notching up rates for one to five year fixed mortgages over recent weeks, while floating rates have remained stable. Five year rates have now breached the 8 per cent mark in some cases, with overall increases ranging from 0.10 to 0.50 percentage points.
National President Max Oliver says the Institute wasn't expecting a lift in rates before December. "We have all been aware, however, that should the New Zealand dollar fall, interest rates would be the first to be affected."
While it was obvious earlier in the year that low rates wouldn't be a permanent fixture, "this is one month of raised fixed rates, and one month does not constitute a pattern," Oliver says. "People should not make hasty decisions based on this upswing."
According to mortgage banker Cairns Lockie, the reasons for the higher fixed rates include:
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Strong performance by the US economy, leading to inflationary fears;
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Signs of improvement by some South-east Asian economies, signalling the end of the Asian crisis; and
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Rising commodity prices, especially oil and some metals.
US interest rates (which directly influence our bond markets) will certainly bear watching, as bond yields hit 6 per cent last week for the first time since May 1998 and speculation mounted that American central bank The Federal Reserve will boost rates at the end of this month.
However, Cairns Lockie maintains that any further increases in New Zealand mortgage rates will be slight, given our low inflationary environment and the role of the Reserve Bank in the economy.
