Get ready for a big rate hike

TLDR: Banks have been holding back from passing on higher wholesale rates into their discounted one and two year mortgage rates, but they could capitulate and bump up their rates well over 6% if the Reserve Bank hikes 75 basis points and forecasts a near 5% OCR next year.

Te Pūtea Matua (the Reserve Bank) will deliver its last monetary policy decision of the year at 2pm today and could well ‘front load’ a very big rate hike to send a very clear inflation-fighting message to consumers before Christmas, knowing it can’t send another strong signal until February 22.

The RBNZ has been hiking the OCR at a fast pace, and that may continue today since it can’t send another strong signal till late February. And that means we may see banks bump up their rates to well over 6%. Photo: Lynn Grieveson / The Kākā