Yesterday afternoon, the Reserve Bank of New Zealand (RBNZ) announced for the seventh consecutive time that the Official Cash Rate (OCR) will remain at 5.5%. Alongside this, the Government has made a surprising move by terminating the First Home Grant program with immediate effect. Let’s delve into what these announcements mean for you.
Key Points from the RBNZ Announcement
- OCR at 5.5%: The decision to maintain the OCR at 5.5% is primarily driven by domestic inflation, which remains at 5.8%. Despite a gradual reduction in headline inflation towards the target band of 1-3%, the RBNZ has chosen to hold steady.
- Economic Indicators: The RBNZ noted the government’s signal of reduced spending but couldn’t incorporate potential impacts from the forthcoming mini-budget, which might include tax cuts.
- Future Rate Expectations: Borrowers are anticipating that the OCR may start easing towards the end of the year or more likely in the second quarter of next year. For now, the 1-year fixed rate remains a popular option for many.
Important Update for First Home Buyers
In a move that took many by surprise, the government has decided to terminate the First Home Grant program effective immediately.
- First Home Grant Termination: While existing applications will still be processed, no new applications will be accepted by Kainga Ora.
- Impact on the Property Market: With the property market already experiencing high inventory levels and an expected increase as investors sell off properties before the Brightline rule changes on July 1st, the removal of the First Home Grant presents a significant challenge for many aspiring homeowners.
What This Means for You
- Borrowers: Stay informed and plan accordingly. With the OCR likely to remain unchanged in the short term, consider the benefits of a lending review. It might be an excellent time to reach out and discuss your lending strategy.
- First Home Buyers: Be aware of the market changes and adjust your plans. While today’s announcement may impact your deposit strategy, there are still options available for high LVR lending that you can explore now.
We’re Here to Help
Navigating these changes can be challenging, but we are here to provide you with the best advice tailored to your individual needs. If you have any questions or need help, especially in light of today’s announcements, please reach out. Together, we can see how to move forward in this evolving market.
Get in touch for more information or to discuss your specific situation. Let’s ensure you’re prepared for whatever comes next