Fixed mortgage rates may have peaked, says Kiwibank

Kiwibank thinks the official exchange rate could start falling within a year.

Kiwibank thinks the official exchange rate could start falling within a year.

According to Kiwibank forecasts, fixed-term mortgage rates and other fixed interest rates may have already peaked.

The Reserve Bank assumes the official exchange rate will rise to 4% next year from 3% currently.

But banks have priced in further upward movement in OCR into their lending rates, and Kiwibank said in a research note on Monday that it believes the market is “perfectly priced, for now.”

The bank said it expects commodity prices and shipping costs to “continue to decline through 2023”.

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He predicts that a slower rise in the prices of imported goods will slow domestic inflation and said economic growth is also slowing.

“If our predictions come true, the Reserve Bank may be able to start cutting interest rates in the second half of 2023,” he said.

Kiwibank predicted that the housing market would be “better balanced” in the future, as a housing shortage disappeared over the next 12 months and the housing market then entered a new era where demand and supply were more synchronized.

Fears of runaway inflation have given way to worries about recession among some economists, amid a slump in consumer and business confidence in recent months.

But there are signs that sentiment is starting to stabilize, with global equity markets now well off their year lows.

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Kiwibank predicts a “soft landing” for the economy, but said the risks were “certainly tilted towards a deeper correction”.

Employment data released by Stats NZ on Monday meanwhile suggested the labor market could be heating up again and showed the difficulties facing economists as they try to pick the point at which interest rates interest might turn.

Statistics said the number of people in filled jobs rose 0.5% to 2.31 million in July, after falling 0.4% in June.

ANZ, which has been more hawkish in its interest rate outlook than other banks, said the higher-than-expected seasonally-adjusted jobs numbers were “unwelcome from an inflation-targeting perspective. “.

“The labor market is highly inflationary and the Reserve Bank needs to see things calm down significantly to be confident that domestic inflationary pressures will subside,” he said.

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