Fixed rates may be past peak, bank says

Fixed-term mortgage rates and other fixed interest rates may already have peaked, according to Kiwibank’s forecasts.

The Reserve Bank is assuming the official cash rate will climb to 4% next year, up from 3% now.

But banks have been pricing-in some further upward movement in the OCR into their lending rates and Kiwibank said in a research note yesterday that it believed the market was ‘‘perfectly priced, for now’’. The bank said it expected commodity prices and shipping costs would ‘‘continue to decline into 2023’’.

It is forecasting slower price rises for imported goods will cool domestic inflation and said economic growth was also slowing. ‘‘If our forecasts are realised, the Reserve Bank may be in the position to start lowering interest rates in the second half of 2023,’’ it said.

Kiwibank predicted the housing market would be ‘‘better balanced’’ in future, as shortages disappeared over the next 12 months and the market moved into an era where demand and supply were more in sync.

Fears of spiralling inflation have given way to concerns over recession among some economists, amid a collapse in consumer and business confidence over the past few months.

But there are signs sentiment is starting to stabilise, with global sharemarkets now well off their year-lows. Kiwibank is forecasting a ‘‘soft landing’’ for the economy but said the risks were ‘‘certainly tilted towards a deeper correction’’.

Meanwhile, jobs data released by Stats NZ yesterday suggested the labour market might be heating up again. Stats NZ reported the number of people in filled jobs rose by 0.5% to 2.31 million in July, after falling 0.4% in June. ANZ bank said the stronger-than-expected seasonally adjusted jobs numbers were ‘‘unwelcome from an inflationtargeting point of view’’.