Yesterday, the Reserve Bank cut the Official Cash Rate (OCR) by 0.5% taking it down to 4.25%. This marks a positive shift for borrowers, with the potential for further rate cuts early next year if economic conditions stay on track.
Here’s What It Means For You:
- Mortgage Relief: Some banks have already adjusted their floating rates in response to the OCR drop, and we expect more to follow. This could mean lower monthly repayments in the coming weeks. Fixed rate adjustments may follow in the coming days.
- Improved Borrowing Power: Already, one major bank has dropped it’s servicing rate by 0.5%. This means it may be easier for potential buyers or current homeowners to qualify for lending or secure higher loan amounts.
This change could make refinancing more attractive for those looking to upsize or fund summer renovations, and could open doors for individuals who were previously declined, as they may now be eligible for funding. - Time to Reassess Payments: Many homeowners extended their loan terms over the past couple of years to manage higher interest rates. Now could be a good time to revisit your repayment plan. If possible, consider keeping your payments the same as they are now, or even increasing them slightly. This can help shorten your loan term and save you money on interest in the long run.
- Bank Response Times: While the OCR change is effective immediately, banks will need time to fully implement their rate adjustments. Given the current staffing levels and processing times, it may take up to 2 weeks to see new competitive fixed rate offers. In the meantime, reach out so we can ensure you’re ready to act when new rates are announced.
- A Boost for the Housing Market: With borrowing becoming more affordable, it’s anticipated that lower mortgage rates will encourage more activity in the housing market. This could lead to moderate growth in 2025 and creates opportunities for both buyers and sellers.
What Should You Do Now?
- If you’re on a floating rate, expect changes to take effect in the coming month.
- If your fixed rate is coming up for renewal, Get in touch! This is a great opportunity to review your options.
- Considering a new property or refinancing? Reach out so we can explore how these changes can work in your favour.
If you’d like to read The Reserve Bank’s full media release CLICK HERE
If you have any questions or would like to review your financial strategy, get in touch! I’m here to help you navigate and make the most out of your options.
