Official Cash Rate

PHOTO: Financial markets have already priced in an Official Cash Rate of around 3 percent by mid-2023, ASB chief economist Nick Tuffley confirms. Photo credit: Getty Images.

The window of record-low interest rates is diminishing rapidly for borrowers, with ANZ, ASB and Westpac among the banks to lift their retail mortgage rates on Monday.

Across the five main banks, standard one-year fixed mortgage rates start from 3.65 percent, two-year from 4.35 percent, and three-year from 4.69 percent. Five-year rates start from 5.19 percent, the cheapest floating rate from 4 percent.

Ahead of Wednesday’s Official Cash Rate (OCR) announcement, ASB chief economist Nick Tuffley told Newshub financial markets have already priced in an OCR of around 3 percent by mid-2023.

house prices

High inflation, house prices likely to force OCR rise this week – economists

After consumer prices jumped 4.9 percent over the year to September, a survey of business inflation expectations  released by the Reserve Bank on November 18 shows expectations have “risen very sharply”.

Annual consumer price inflation is expected to reach 3.7 percent in one year and 2.96 percent in two years, above the Reserve Bank 2 percent target midpoint, survey results showed.

Following the results, wholesale interest rates went up, causing a sharp lift in retail mortgage rates and savings rates.

“We’ve seen wholesale interest rates rise very sharply and that’s feeding through into all the term lending rates,” ASB chief economist Nick Tuffley said.

While ASB forecasts show a 25 basis point rise to the OCR to 0.75 percent on Wednesday, markets have effectively priced in a 50/50 chance of a 50 basis point increase, Tuffley said.

“If we see a 50 [basis point rise], it’s likely wholesale rates will go up a bit further,” Tuffley said.