Yesterday, The Reserve Bank made the decision to reduce 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 did the OCR get cut?
The Reserve Bank cuts the OCR when it wants to encourage spending and investment. Right now, the New Zealand economy is facing a bit of a slowdown.
Things like business investment and consumer spending have been weaker than usual, and employment is softening. This is practically due to global economic challenges and a period of low productivity here in New Zealand.
In simple terms, our economy needs a bit of a boost, and lowering the OCR is one way to make borrowing cheaper, helping people and businesses spend more.
How does this affect your mortgage?
If you’re on a floating or short-term fixed-rate mortgage, the recent OCR cut is likely to bring lower interest rates your way. The banks tend to adjust their floating rates in line with the OCR, you could see a drop in your mortgage payments, giving you a little more breathing room in your budget.
If you’re on a fixed-rate mortgage, the change won’t affect you immediately, but you could benefit from it down the line. For instance, ANZ currently offers a market-leading 1-year fixed rate of 5.59%, and other banks are likely to follow suit to stay competitive. When your fixed term ends and it’s time to refix, you might find lower rates available, helping you save on interest costs.
Thinking about buying a home?
For those of you looking to purchase a home, this OCR cut is good news!
Lower interest rates mean borrowing becomes more affordable and potentially allowing you to borrow more or secure better repayment terms.
How we’re helping clients stay flexible
At The Mortgage Supply Co, many of our advisers have been documenting loans that are due to settle in the coming weeks on floating rates. This strategy allows the loan documents to be finalised in time for settlement, whilst giving you the flexibility to lock in a fixed rate at a later date. This approach could be beneficial with rates expected to remain low for some time, giving you more room to make a well-timed decision.
What should I do next?
If you’re currently on a floating rate mortgage, or have a fixed-rate term ending soon, it’s a good idea to review your options. With rates likely to stay lower for a while, you may be able to save on interest by locking in a new rate.
Reach out to your Mortgage Supply Co adviser to discuss how these changes could affect your financial situation and how we can help you take advantage of the current market conditions.
If you don’t have an adviser yet, we have a team of experts based across New Zealand. No matter your unique situation, we’re confident you’ll find the right advice with us.
Not sure where to start? Give our head office a call, and we’ll help connect you with an adviser who best suits your goals and needs.
In conclusion, the OCR cut is a step towards making borrowing more affordable and restoring 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 want to chat about your options, don’t hesitate to get in touch with us. We’re here to help you navigate these changes and make informed decisions.
