Lol,

Let me guess, the person had a mortgage right 😀

This argument was put to me last week. No joke.

Tax treatment is bound to have some impact. Look at how serious suggestions of tax have lead to a collapse in investor demand, and rising listings, in the marketplace. There is going to be pressure on prices – the question is how sticky nominal prices will be …

At the moment yes. But as the OCR increases, and the future expected OCR is expected to be lower, then the rate of increase in the fixed rates will be slower than floating rates. The reason fixed rates are higher now is because the OCR is expected to be, on average, higher in 1, 2, 3 years times.

Forcing the banks to match maturities has increased fixed rates as well – no doubt. But over the economic cycle we would still expect the yield curve to invert at some point. What was weird was the fact that the yield curve in NZ was pretty much always inverted, that didn’t make much sense.

But don’t the bank funding costs increase ‘further out’ the curve, given the costs of longer term funding are inevitably more than short term fund (now we have a positive yield curve) and the Reserve Bank is forcing them to avoid funding/maturity mismatches?

cheers
Bernard

In my dreams …

Either way, the life of an economist is one of soulful reflection, we shouldn’t be materialistic and own property. I’m willing to claim that this is the reason why I haven’t purchased anything.