By BRIAN FALLOW
Home owners have been spared another increase in interest rates - for now.
After raising rates five times since November, Reserve Bank Governor Dr Don Brash left the official cash rate unchanged at 6.50 per cent yesterday.
Since November, Dr Brash has raised rates at each of the six-weekly official cash rate reviews.
But despite yesterday's pause, experts say more rises are on the way.
Bank of New Zealand chief economist Tony Alexander said floating mortgage rates would probably rise by half a percentage point by the middle of next year, but for fixed-rate mortgages the peak may have passed.
ASB's BankDirect, for example, yesterday cut its two-year rate from 8.55 per cent to 8.25 per cent.
A month ago, money market dealers were betting that the wholesale interest rates, which determine floating mortgage rates, would rise a further half a percentage point by the end of September.
Now, after sharp falls in business and consumer confidence, they see only another quarter of a point by the end of the year.
Most economists, however, are forecasting another quarter of a percentage point rise from Dr Brash in August, and at least one more after that before he is done.
Real Estate Institute national president Max Oliver said he was disappointed that banks appeared to be talking up the mortgage rate. There was no justification at the moment for a rise in mortgage rates.
"There isn't a lot of confidence there. Business is going well for export but certainly not internally.
"Saying rates will rise again in August is really putting a dampener on the economy before it has had a chance to recover."
Master Builders' Association vice-president Graham Coe said yesterday's decision was a positive indicator, but he also expected another increase by next month.
Interest respite for home buyers
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