PHOTO: Mortgage rates are looking to increase significantly in 2022. FILE
Interest rates are likely to rise every single time the Reserve Bank has an opportunity to do so over the next year if a key indicator is to be believed.
The official cash rate (OCR) was hiked for the first time in seven years in October, rising from a record-low 0.25 percent to 0.50 percent – otherwise known as a 25-basis point rise. The central bank at the time signalled further rises were likely with inflation rising and house prices spiralling out of control.
Investors appear to be putting their money where the Reserve Bank’s mouth is, with movements on the bond market predicting the OCR to be five times higher in a year’s time than it is now.
“The bond market is effectively a market where people like governments and businesses can borrow money,”Milford Asset Management portfolio manager Mark Riggall explained on The AM Show on Thursday.
“The interest they pay on that borrowing is where they expect interest rates to be in the future, not where are interest rates are now… looking at the bond market we can get a guide as to where we think interest rates might be in a year’s time, two years’ time or even 10 years’ time.”
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