Weak economic data across key economic drivers from the end of 2010 still dominate financial markets.
Real estate figures were weak, net borrowing was down, residential building consents were at new lows and unemployment was up.
This means wholesale interest rates have dropped slightly, but not enough to influence advertised retail/home
loan rates at this stage.
I suspect gross domestic product figures for the December quarter will be negative, confirming a "double dip recession".
All this weak data reflects a low level of confidence, which means people will sit back and watch, rather than take action.
This state of mind will hold back our recovery for some time as borrowers concentrate on reducing debt and survival.
Had world commodity prices not been so strong - up 43 per cent from the lows of the global financial crisis - we could have been in real trouble.
We always keep an eye on data from the United States and that has been improving consistently during the last two months, leading longer term interest rates to increase there and confidence about the future to improve.
Sharemarkets are all about confidence and we have seen a reasonable surge in the US sharemarket as a result of this.
New Zealand's medium to longer-term fixed interest rates are largely determined by the outlook for our own economy and interest rates in the US.
The present weakness and uncertainty for the New Zealand economy appears to be winning the race and wholesale interest rates have eased slightly.
There has been a growing debate about whether the Reserve Bank should reduce the Official Cash Rate.
I believe it should aggressively cut the rate by 0.5 per cent or more. New Zealand needs a shot in the arm to break the current negative mindset.
Such a decision is not straightforward, however it is difficult to see what other event could have the same result.
With an increasing portion of home loan debt going onto variable rates, when inflationary pressures do start to build the Reserve Bank has the ability to get an almost instant result when it needs to put up rates.
Given all of this, the variable rate still seems the place to be at present and for some time.
For fixed rates, the weakness of the New Zealand economy is keeping the lid on the medium-term and longer-term fixed rates, despite some pressures from increasing rates in the US.
That weakness is likely to continue for some time and it would appear it is still not necessary to move to fixed rates. As always, there are no guarantees!
We are noticing more borrowers taking advantage of a quite attractive two-year fixed rate and generally mixing that rate and the variable rate.
For those people, an element of certainty is important and they are deciding to forgo perhaps 0.35 per cent now to gain that certainty.
- Brian Berry is a mortgage adviser with Rothbury Financial Services Rotorua