A 6% mortgage rate within months? Really?
ANZ’s economists lift forecast OCR track by 1%, suggesting a 6% fixed mortgage rate is possible within months as omicron fills our hospitals, empties shelves and freezes housing markets. Really?
TLDR & TLDL: ANZ’s economists have thrown a rat-eating cat among the pigeons for everyone to swallow with a prediction the Reserve Bank may be forced to hike the Official Cash Rate to as high as 3% by early next year at the same time as house prices are falling.
That’s a full one percentage point more than previously expected and implies two-year fixed mortgage rates could rise to over 6% within months. But is that actually possible or even likely at a time when an inevitable omicron outbreak is likely to have filled our hospitals, emptied our shelves and frozen activity in our housing markets?
I look in more depth below the paywall fold at why big rate hikes later will make it difficult for the Reserve Bank to sustain, even with inflation over 5% and unemployment headed for 2%.
Elsewhere in the news today:
an omicron planning document written for the PM’s office and leaked to Maori TV warns case numbers could reach tens of thousands a day and overwhelm our ICU capacity;
truckies and retailers are calling for drivers and shelf stackers to be exempted from close contact isolation rules in the event of an omicron outbreak (Newshub); and,
the German 10 year bund yield briefly moved into positive territory for the first time in nearly three years on growing investor fears and hopes that central banks will hike rates faster to contain inflation.
I’m in New Plymouth covering the Labour caucus retreat and the first post-cabinet news conference of the year with the PM.
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