Interest Rates

6 March 07

The latest housing finance data lends support to the view that official interest rates have reached a peak. Trend data show that the total value of housing finance commitments has fallen steadily since mid 2006.

Three interest rate rises last year were having the intended effect of suppressing demand for finance. Housing finance commitments rose just 0.1 per cent in December, adjusted, and the total value was up 1.9%.

These figures support the view that we have seen the peak in this interest rate cycle. The Reserve Bank will continue to maintain a hawkish tone but their comments can be expected to soften as the year progresses.