Good news for borrowers! The Reserve Bank made a significant announcement yesterday, lowering the Official Cash Rate (OCR) by 25 basis points to 5.25%. The move signals a change in monetary policy that could provide much-needed relief to those suffering the consequences of rising mortgage payments.
What this means for your mortgage
Following the OCR reduction, banks have already adjusted their floating rates, and we are also seeing some reductions in fixed rates. While this is a positive step, it is crucial to approach rate decisions strategically. We have recently focused on the 6-month rate due to its more favorable position compared to floating rates.
- Floating rates or fixed rates:
With floating rates fluctuating, it’s tempting to wait in hopes of getting a lower rate. However, the gap between the variable rate and the 6-month rate is currently quite large. Often, when card rates drop, the discount offered may not be as good as those available before the reduction. Therefore, opting for a 6-month fixed rate could offer better stability and savings compared to a variable rate.Recognition of the rate gap: It is also worth noting that as rates begin to fall, it is normal for long-term rates, such as the 5-year rate, to fall more significantly than short-term rates. This trend may present opportunities for borrowers looking to lock in a rate for a longer period of time, based on their financial goals and risk tolerance.
- Market Outlook:
Looking ahead, we expect market activity to increase as the impact of the OCR reduction begins to be felt. If banking rates follow suit and continue to fall, we could be approaching the bottom point of house price declines.Although high inventory levels are still available in the market, as the average time to sell shortens and inventory levels decrease, we may see a gradual increase in property prices over time.
- Bank processing times:
It should be noted that bank processing times remain extremely long. If you are considering making changes or refinancing, be patient and proactive.
By joining early, you will benefit from the current pricing environment before any changes occur.
Read the summary of the Reserve Banks meeting HERE
Stay informed
As always, we are here to help you navigate these changes. Please do not hesitate to contact us if you have any questions or need advice on how these rate changes impact your mortgage strategy.
