Interest rates on hold despite rebound: Report

They have released the bank’s latest Property Focus report, which uses 10 gauges to predict the future direction of house prices.

They note that residential building consents have picked up, volumes and prices have strengthened – albeit with regional differences, mortgage rates are largely static, and mortgage approval numbers and values rebounded in December after a slight easing in November.

The number of home loan approvals lifted a seasonally-adjusted 14% in December, to the third-highest monthly figure in 2014 and up 15% on a year ago.

Affordability had deteriorated, although falls in fixed interest rates had helped, and servicing as a proportion of income had reached a two-and-a-half year high.

The economists said they expected no further interest rate hikes until the end of next year.

“We expect the OCR to rise by just 1% before the current cycle is complete. But it’s not just that we don’t expect monetary policy to do much – we don’t expect to see hikes until late 2015 at the earliest and they are extremely conditional on a pick-up in inflation and a recovery in dairy prices.”

The report said LVR restrictions were having a dampening effect but were unlikely to be lifted any time soon. 

“The combination of very strong net migration and low mortgage rates (by New Zealand standards) would typically be feeding a house price boom by now. Speed limits on high-LVR mortgage lending are therefore here to stay for some time yet, though other prudential policy mechanisms may be introduced to try to level out the playing field between first home buyers and property investors."