Good news for borrowers! The Reserve Bank made a significant announcement yesterday, dropping the Official Cash Rate (OCR) by 25 basis points to 5.25%. This move signals a shift in monetary policy that could bring some much-needed relief to those feeling the pinch of higher mortgage payments.
What This Means for Your Mortgage
Following the OCR cut, banks have already adjusted their floating rates, and we’re seeing some reductions in fixed rates as well. While this is a positive step, it’s crucial to approach rate decisions with strategy. Our recent focus has been on the 6-month rate due to its more favorable position compared to floating rates.
- Floating vs Fixed Rates:
With floating rates fluctuating, it’s tempting to hold out in hopes of catching a lower rate. However, the difference between the floating rate and the 6-month rate is currently quite substantial. Often, when carded rates drop, the discount offered may not be as advantageous as those available before the reduction. Therefore, opting for a 6-month fixed rate might offer better stability and savings compared to staying on a floating rate.
Acknowledging Rate Variance: It’s also worth noting that as rates start to decrease, it’s normal for longer-term rates, such as 5-year rate, to shift downward more significantly than shorter-term rates. This trend may present opportunities for borrowers looking to lock in a rate for a longer period, depending on their financial goals and risk tolerance.
- Market Outlook:
Looking ahead, we anticipate increased market activity as the impact of the OCR cut begins to filter through. If bank servicing rates follow suit and continue to decrease, we might be approaching the bottom of the property price decline.
Although high levels of stock are still available on the market, as the average time to sell shortens and inventory levels decrease, we could see a gradual rise in property prices over time.
- Bank Processing Times:
It’s worth noting that bank processing times are still extremely lengthy. If you’re considering making any changes or refinancing, be patient and proactive.
Getting in early will ensure you benefit from the current rate environment before potential shifts occur.
Read The Reserve Banks meeting summary HERE
Stay Informed
As always, we’re here to help you navigate these changes. Feel free to reach out if you have any questions or need advice on how these rate changes impact your mortgage strategy.
