OCR cut again, time to take a breath...

 

This time it was Westpac that lead the charge by reducing its six month rate to 5.39 percent down by .40 percent. Not a bad start, and more will follow.

It was only a few weeks ago that there was a stampede of people towards long term fixed rates and I guess many of them will now be starting to wonder why they got caught up in the hype after reading Dr Bollards comments that it is likely he will keep interest rates low until late 2010, really there is nothing new there, as I am sure that is what he stated after the last meeting.

I think people should start reading between the lines rather than only the attention grabbing HEADLINES. Many think we have seen the end to low long term fixed rates. When I read that I thought, who is Many?

Dr Bollard also mentioned some months ago that it was unlikely he would reduce the rate below 2 percent. That gave me a figure to work by and has been pretty reliable much like his judgement has been in keeping with the current economic climate.

I think many still judge the Reserve Bank by previous policy trends rather than moving with the times as they have.

What was good to see yesterday, is that it is very clear to me that the current Government and Dr Bollard are on the same page, which I don’t think has been the case for some time.

What did I predict would happen yesterday?  - just what happened, .50 percent cut, I never for one minute thought he would bother with .25 as that would have been a wet ticket approach and would not have benefited anyone.

In saying that, I would not have been surprised to see him leave it unchanged until next time and I am keen to hear what others think about that.

Just what impact will it have on the housing market? Very little I believe, unless long term rates ease a little, and that is a real possibility.

Some believe what Dr Bollard does or doesn’t do has little impact on the long term interest rates, but I don’t go along with that.

I am not one to generalise or walk around with blinkers on, I tend to look at the big picture and go from there.

What would I be doing if I had a mortgage; I guess that would really depend on the size of the loan and how any change in rates would affect my lifestyle. I think for now I would be content to sit in the shade and ponder for a little longer.

When was the last time you saw an interest rate at 5.39 percent? What rate did I predict some months ago, 4.75 percent - it’s getting closer isn’t it.

OCR 2 percent retail rates 4.75 percent, works for me.

Next week I will put together an update after the banks have finished squaring off. Until then, enjoy the shade.