Like hearing the starting gun for the Olympic Games 100m final, NZ’s major banks were quick out of the blocks lowering mortgage interest rates in response to today’s RBNZ OCR Announcement.
In the first cut since March 2020, the RBNZ OCR announcement cut by 25 basis points moving it from 5.50% to 5.25% – a decision that reflects the RBNZ’s efforts to stimulate economic activity by making borrowing cheaper, which is designed to encourage spending and investment.
The change signals more cuts could be on the horizon; with the Official Cash Rate forecasted to be 5% by the end of the year, and potentially down to 4.5% by June 2025. Wouldn’t that be nice!
Kiwibank lead the charge by immediately reducing mortgages rates by 25 basis points closely followed by ASB – with cuts ranging from 10-34 basis points across a range of terms.
Finance Minister, Nicola Willis, welcomed the drop in the Official Cash Rate this afternoon, and believes the cost of living crisis had been characterised by high inflation and high interest rates, and today’s changes with the OCR, showed the era of high price increases was over.
“This means Kiwis will pay less interest on their mortgages and personal loans. Things are going to get better. It is cloudy, but rays of light are getting through,” Willis said.
“Green shoots of recovery are possible. Today’s announcement is an encouraging sign we are getting New Zealand back on track, “ explains Willis.
CoreLogic NZ chief property economist, Kelvin Davidson, shares a similar view today saying “most people had already been anticipating an easing in monetary policy at some stage soon, and this has now just been confirmed. Indeed, banks have already been lowering mortgage rates for some fixed terms, and this process looks set to continue – which will be a huge relief for many households.”
The Reserve Bank also announced that inflation was set to return to within the Monetary Policy Committee’s 1 to 3% target band.
While the cut provides some immediate relief for those in the mortgage market today, we believe the full benefit of todays’ cuts (and future ones) might take some time to filter through to NZ households.
Beyond the impact on interest rates the important feature of today’s RBNZ OCR announcement is it marks a fundamental change in monetary policy sentiment; with a positive outlook now aiming towards managed growth in the economy, which will hopefully see business and consumer confidence improve thereby stimulating economic activity.
Now is the time to talk to a Properli Financial Adviser about how you can benefit from these changes by choosing the right strategy and loan structure for your circumstances and goals– whether your fixed rate is ending, you are refinancing or getting a new loan or wanting to enter the property investment market. Learn more about Mortgages on our website.
