Reserve Bank Dec 2015 and what you should know

by Dec 13, 2015Mortgages

The OCR came down yesterday to a record low and most homeowners and buyers looking to see what effect this will have on short term rates which are already at a 50 year low too. The Reserve Bank is also sending out caution signs so here’s my take on their stance.

  1. The RB is more concerned about the possible price reductions in Auckland than deflation. It sees inflation at around 2% next year whilst most Bank economists feel this won’t happen without more rate cuts.
  2. The RB knows it can’t please everyone, a bit like the current Flag issue! For borrowers lower rates are the way to go but for savers, rates need to rise. For exporters lower rates mean easier selling overseas whilst importers like higher rates as it makes imports cheaper. Good luck in trying to walk through that!
  3. The dollar is still too high and despite the current OCR drops the dollar continues to rally leaving the RB rather frustrated.
  4. Currency markets are mad. Yesterday’s cut should have brought the dollar down, it rose by a full cent against the US. Seems that the markets are more interested in forecasts which look good and so minimise the need for further OCR cuts. However the RB doesn’t put words in documents for nothing and so they may still reduce the OCR if they feel the need to do so. Confused? You should be, bottom line is that no-one really knows what will happen next year other than rates will remain low, whichever way they go.
  5. There are four big risks to New Zealand’s economy
    • China slowing and a weaker Global economy
    • Dairy prices staying low
    • El Nino summer causing drought and cutting GDP growth
    • Immigration staying high causing increased pressure on housing stock fuelling more borrowing for consumer goods

So for Mortgage borrowers what’s in store? Lower rates for certain but many feel that fixed rates have little or no room to drop further. The main message here is mortgage structure. Decide how much you can afford each month and over pay, make low rates work for you and not the Bank! As always we are here to assist so look forward to any questions you may have. Email is jeff@ilender.co.nz or 0800 LENDER (536337)

Have a great Christmas and prosperous 2016!

About iLender

At iLender we put your best interests first and not the Bank – our advice is unbiased as all Lenders who we do business with pay about the same in commissions.

Although we are Auckland based Mortgage Brokers, we help customers everywhere in New Zealand and overseas with buying property in New Zealand, as we are very much about online and giving advice here and now!

4 Tiers of Non-Bank Lending: What You Need to Know

It’s currently a struggle for every New Zealander: trying to get the bank to approve their home loan. Lending restrictions are tighter than ever, even for New Zealanders with a perfect credit history.  Luckily, non-bank lenders offer an alternative approach that...

The New Zealand housing market: Is now a good time to buy?

The New Zealand housing market has experienced some major ups and downs in recent months due to some interesting regulatory changes as well as wider global economic conditions.    House prices across the country have started to fall while interest rates have...

4 Reasons we are not in a ‘crash’

There's a lot in the press about house prices and which way they will go. What's not said (because it's not 'newsworthy') is that we've been here before and thrived.  House prices always go up over time and there is nothing to say this will change. Buying and selling...

How to prepare your personal finances when applying for a mortgage

When it comes to securing a competitive home loan, saving up for a deposit is just one piece of the puzzle. Lenders also need to be confident that you’re trustworthy, reliable and financially secure - in other words, you’re someone who’s capable of making mortgage...

Best mortgage rates, 10% deposit owner occupied and 20% rental purchase, self employed with no financials and help for those with bad credit or arrears.

Hundreds of reviews on TradeMe and Google makes us your ‘Number 1’ choice.

Call 0800 536 337