You heard it here, but also let’s acknowledge up front that I’ve called it before and been wrong. This situation is different though. The OCR has reached the bottom, bank margins are tight, and term deposits can't go much lower.
Interest rates are still low and the housing market seems to be thawing out after a slow 2019. That said, the latest uncertainty comes in the form of Coronavirus and what impact it could have on the economy. Here's a roundup of our views.
Auckland has come back to life after two years of lacklustre house sales and easing house prices. At the same time, the rest of New Zealand is taking a bit of a pause after a strong run of price appreciation.
For the past thirty years there has been a strong correlation between property prices and interest rates. As interest rates fall, property prices go up. So, as interest rates continue to fall, property prices could potentially increase further. My view is that won’t happen.
There’s something mildly exciting about the Reserve Bank doing something unexpected. It’s like finding $5 in your jeans. I’m a borrower so I’m loving the prospect of lower rates but I’m also a realist and know that the reasons behind the OCR dropping are worrying. We should all be using this opportunity to pay back debt and build safety buffers into our lending.
Our view is that mortgage rates will stay low for the foreseeable future, but they are unlikely to drop much further. To explain this, we'll look at the bigger picture, and shed some light on how the OCR affects mortgage rates.
The Reserve Bank has come out with a gloomier outlook for the NZ economy and the global economy. In the short term that means the potential for lower mortgage rates has increased.
Housing markets typically move in cycles – often referenced as the ‘property clock.’ Anyone with an interest in property sits around guessing what time it is. If you observed the clock over the past thirty years, it has largely worked out, but right now reading the property clock is getting harder.
A mortgage isn't something you set and forget. It should be reviewed regularly with the ups, downs, plot twists of life and interest rate fluctuation. Especially if you want to pay it off as fast as possible and save money on interest. If you haven't had yours reviewed in a while, here are 5 simple things to consider.
Feel like you’re missing out on a good mortgage rate? If you only recently bought your first home, you’re not alone.
Most media commentators are hooked on the new ‘rate war’, and the question being asked is if this is the new ‘norm.’ It isn’t, and more than that, you could easily miss out if you procrastinate.
12 Month interest rates are at all time lows for New Zealand, however it may not be prudent to fix over that term. In part 1 we covered the OCR, inflation the connection between inflation and interest rates. Let's now talk about forward interest rates and current inflationary drivers in NZ.