– Monetary Policy Tool used by Reserve Bank of NZ (RBNZ) to influence Economic Growth and Inflation since early 1999. The OCR has introduced much needed stability to NZ's residential mortgage interest rates. Effectively the same method of Fiscal Management used by USA, UK, European Central Bank and Australia (see www.rbnz.govt.nz for more information).
:: Floating (Variable) Rate
– Pricing level is usually set at OCR & 90 day Bank Bills plus lending margin of approx. 200 basis points or 2%.
:: Fixed Rates
– Pricing level is set by Financial Markets themselves based on their view of the future. Their view of
the future is influenced by Economic Performance and Interest Rate forecasts. The Lender will then add their lending
margin which varies dependant on the Lender and
market conditions.
:: Yield Curve
– All interest rates currently available plotted on a graph. The relationship of these rates gives an indica-tion of what might happen in the future.
:: Risk Premium
– NZ is always likely to have higher Mort-gage Interest Rates than other 1st World Countries. Due to our geographic location, and the small scale of our financial markets, NZ generally must pay a Risk Premium for funding on International Markets.
