Analysis: Mortgage holders shouldn’t get too excited that recent small cuts to interest rates are a sign of things to come, writes Katie Bradford.

It may be easier to pick the winning Lotto numbers right now than to accurately predict what might happen to interest rates in the next few weeks.

For mortgage holders who are still lucky enough to have interest rates in the ‘twos’ or ‘threes’ – or even ‘fours’ – their rates will be starting to come off soon.

The rates staring at them from their banking app are now well over 6% or 7%.

That’s a near doubling in weekly payments. Many others have already suffered that pain and are sitting there every week doing the sums and finding it doesn’t quite add up.

Just before Christmas there was a flurry of excitement as markets and economists started to predict official cash rate cuts as early as the second half of the year.

That now looks unlikely. We’ve seen some banks make minuscule cuts.

There’s no doubt the Reserve Bank’s moves in hiking the OCR – with the aim of attacking inflation and what was a scorching hot economy – are working.

The economy is cooling. But it’s an economic slowdown that’s moving at a snail’s pace.

Unemployment is inching up. The Employers and Manufacturers’ Association says there’s been a 90% increase in calls to its helpline about redundancies and restructures.

Companies are looking at that cooling economy and assessing where they can make cuts. It’ll be jobs that face the axe.

Migration data crucial

But if you’re confused about why we are still seeing some sparks of fire, it’s mostly down to migration.

We’ve topped all records and people keep coming through the arrival gates.

The next round of migration data will be out later this week and it’ll give us a good indicator of how popular New Zealand remains.

More people means more bodies competing for jobs, but also for houses. And that’s starting to light some embers under the housing market.

Some home owners have now been on those higher interest rates for a year or so and have calculated those into their spending.

We’re seeing a boost in first homebuyers – if you lock in an interest rate at 7% on your first home, at least you potentially know what you’re in for over the next few years.

And of course there’s always the glimmer of hope that those rates will go down.

In making that decision, inflation is the key driver of the Reserve Bank’s decision. But it will also look at all other bits of data, big and small.

This week, as well as that migration data, we’ll get a peek at some of those other factors.

On Valentine’s Day we’ll get a bit of love from Stats NZ. Retail spending will tell us if people continue to “cool their jets” as Governor Adrian Orr is a fan of saying.

We’ll also get the next best thing to inflation figures – the terribly named ‘Selected Price Indices’. It’s a small(er) basket of goods including rent, food and alcohol and provides a pretty good idea of what inflation is doing.

All eyes on Adrian Orr

All eyes will then be on Orr on Friday when he makes a speech to an economic forum. It’ll be the body language and the carefully chosen words that watchers will be picking apart.

And then it comes down to February 28. We will hear from the Monetary Policy Committee for the first time in three months.

As well as that crucial OCR decision, it’s all about the language they use on how the economy is tracking. I wouldn’t take a bet on rates lowering – that Lotto ticket is probably a safer purchase. No one expects a cut right now.

A hold is still seen as most likely.

ANZ remains an outlier in picking a hike or two in coming months.

Mortgage brokers say people are holding on to hope that we will see a fall later in the year and some are starting to grab six-month or one-year rates with that in mind.

And that’s to say, there’s just so much uncertainty. Seems like for now we all need to take a deep breath, keep calm and carry on.