OCR Announcement

This week will see the most interesting (almost exciting) OCR announcement since lock down with pretty much all economists expecting the first in a series of OCR increases with most predicting around 1.5% to 2% of increases over the next 18 months. 

I think the big thing is will he (Adrian Orr) start with a big hammer of .50 as opposed to the normal .25%. He may do this to frighten home buyers to stall the price growth. 

Time will tell or will he do nothing and let the new measures he is proposing i.e. DTI’s and a reduction in high LVR lending do the trick.I don’t think so i.e. a mixture of both. 

The reduction of high LVR lending, 20% down to 10% will only hurt one group, first home buyers so how will that sit with the Government? Will first Home buyers be exempt- NO. 

In theory the increase in the OCR (if it happens) will mean nothing to rates as they have already been priced into the Market, in fact .50% is priced in so even a double whammy should not have too much effect. Having said that the last rises should not have occurred. 

I find it interesting that in Aussie the OCR is also .25%  but the 2 year Westpac carded rate is 1.99%. Our rates already seem high by comparison. 

2 Years remains the overall recommendation with long term rates expensive. 

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