This month we have seen a huge amount of attention focused on the financial market in the media. From claims that we are entering a buyer’s market, talk of the OCR, and constant commentary on interest rates, right through to the controversial idea of capital gains tax.
There are a lot of questions floating around about what this all means for the average Kiwi household. So, we are going to cover off a few of the hot topics to put your mind at ease.
Let’s look at what the OCR is and what impact it has on lending, the current interest rates, and the noise surrounding financial advisers.
The OCR, or Official Cash Rate, is an interest rate set by the Reserve Bank. This rate affects all other interest rates offered by the various lenders in New Zealand. It is effectively the wholesale price for borrowing or lending money in New Zealand. It is set by the Reserve Bank to ensure that there is price stability for Kiwis.
This month, the Reserve Bank indicated that the OCR will remain the same at 1.75%. It is expected to remain that way for the rest of 2019 and 2020. A review is scheduled for 2021 and at this stage, it is hard to say whether it will go up or down at that point.
So, what has caused the lack of change?
It is down to the fact that New Zealand’s economy is doing well. Employment is seeing continued growth, inflation is at a low level despite the global weakening. Low interest rates and government spending are expected to see a growth in New Zealand’s GDP this year.
What does it mean for the current interest rates?
Current Interest Rates
As we mentioned last month, the current interest rates are at an all time low. In fact, the average two year fixed interest rate reduced from 4.33% to 4.25% between December and January. This is the second lowest rate since data was first collected in 2002 (the lowest rate was 4.23% in October last year).
While the media are reporting that we are moving into a buyer’s market, there has been no evidence to suggest a significant downturn in the sale prices for houses. However, with interest rates at an all time low and good lending confidence form the banks, property is becoming more accessible for people.
So much so, that first home buyers are continuing to grow their market share and edging closer to investors in the market. In January 2019, first home buyers accounted for 17.3% of all lending, and investors 17.9%. Could the current conditions finally be making property more affordable for the average Kiwi family?
The Field Of Financial Advice
There has been a lot of negativity surrounding financial advice in the news after the Australian banking debacles and the reprimand of life insurers overcharging consumers. This has inevitably had a flow on effect to the field of financial advice with the field under intense scrutiny.
But, all of this doesn’t change the fact that a mortgage broker can really help you with your finances. A DIY approach to your mortgage is not the answer. It will mean a huge time investment and how do you know if you are really getting the best deal?
By comparison, Mortgage Suite have professional relationships with all of the major (and minor) lenders in New Zealand. That means we have access to information that the general public doesn’t. It means we can use our knowledge of the options available and our expertise to ensure you get the best deal for your particular circumstance.
If you would like to discuss anything about your financial position then we are here to help. That could be preparing to buy your first home, upgrading your current home, restructuring your mortgage, or simply refixing your interest rates. Get in touch today for honest advice you can trust.