Yesterday, the Reserve Bank took the decision to cut the official cash rate (OCR) by 50 basis points, bringing it down to 4.75%. But what does this mean for you, as a homeowner or someone looking to buy? Let’s break it down.
Why was OCR removed?
The Reserve Bank reduces the OCR when it wants to encourage spending and investment. Currently, New Zealand’s economy is facing a slight slowdown.
Things like business investment and consumer spending have been weaker than usual, and employment is slowing. This is virtually due to global economic challenges and a period of low productivity here in New Zealand.
Simply put, our economy needs a little boost, and reducing the OCR is one way to make borrowing cheaper, helping people and businesses spend more.
How does this affect your mortgage?
If you have an adjustable rate or short-term mortgage, the recent reduction in the OCR may result in lower interest rates for you. Banks tend to adjust their variable rates based on OCR, so you might see a drop in your mortgage payments, giving you a little more wiggle room in your budget.
If you have a fixed rate mortgage, the change won’t affect you immediately, but you may benefit later. For example, ANZ currently offers a market-leading one-year fixed rate of 5.59%, and other banks will likely follow suit to remain competitive. When your fixed term ends and it’s time to re-fix, you might find lower rates available, which will help you save on interest charges.
Are you considering buying a house?
For those of you looking to buy a home, this OCR cut is good news!
Lower interest rates mean borrowing becomes more affordable and potentially allows you to borrow more or get better repayment terms.
How we help our customers stay flexible
At The Mortgage Supply Co, many of our advisors have documented loans that are expected to settle in the coming weeks at varying rates. This strategy helps finalize loan documents in time for settlement, while giving you the flexibility to lock in a fixed rate at a later date. This approach could prove beneficial as rates are expected to remain low for a while, giving you more room to make a decision at the right time.
What should I do next?
If you currently have an adjustable rate mortgage or if your fixed rate term is ending soon, it’s a good idea to review your options. With rates likely to stay low for a while, you may be able to save on interest by locking in a new rate.
Contact your Mortgage Supply Co advisor to discuss how these changes may affect your financial situation and how we can help you take advantage of current market conditions.
If you don’t already have an advisor, we have a team of experts based across New Zealand. Whatever your particular situation, we are confident that you will find the right advice with us.
Click HERE to meet the team
Don’t know where to start? Call our headquarters and we will help you find an advisor who best fits your goals and needs.
In conclusion, reducing the OCR is a step toward more affordable borrowing and reviving the economy. Whether you’re a homeowner or looking to enter the property market, now is a good time to review your mortgage and explore opportunities to save.
If you have any questions or would like to discuss your options, please do not hesitate to contact us. We are here to help you manage these changes and make informed decisions.