As was widely expected the Reserve Bank of New Zealand (RBNZ) opted to hold the Official Cash Rate (OCR) steady at 5.5% on the 10th of April. This decision reflects a cautious approach in the face of ongoing inflationary pressures, and it is expected that we will need to sustain this level of OCR for some months yet in the goal of returning inflation to the target 1 – 3% band.
I had the opportunity to be share my thoughts and market insights on NewsTalkZB’s Heather du Plessis-Allan Drive show on Wednesday following the announcement: https://www.adviceknight.co.nz/media
If your interest rate is due to roll over in the near term, or you’re in the market for a new home, we completely understand this may not have been the news you were hoping for (but you can rest assured, we will be in touch to suggest a personalised plan to help you navigate these complicated and challenging times).
You can find comfort that key indicators are pointing towards New Zealand being past the ‘interest rate peak’ and there is very low likelihood of any rises in the foreseeable future. Encouragingly, The Reserve Bank noted this time in the statement it was “confident that maintaining the OCR at a restrictive level for a sustained period” would have inflation back in the target band “this calendar year”. In fact, we are already seeing some softening of rates evident by the major banks and do expect to see further decreases inside the next year.
With key factors like our current high levels of migration, a return of interest rate deductibility on investment property lending (currently 80% and moving to 100% by 1st April 2025), less new build consents, increased building costs and the expectation that interest rates have peaked, we are already beginning to see some evidence of increased confidence and a rise in enquiry from both first home buyers and investors returning to the market. Not to underestimate the financial challenges so many of us are experiencing through heightened cost of level pressures, but there is a feeling that change is in the air.
While current economic conditions are challenging, we are strong proponents of maintaining a long-term perspective on your financial goals, particularly when it comes to property investment and we strongly encourage you not to let short-term fluctuations derail your long-term plans. Hunker down over the next 12-18 months; and we feel the light is at the end of the tunnel. And remember, even in a changing economic climate, you do not have to navigate alone. We are here to support you with comprehensive financial advice tailored to your unique needs. Don't hesitate to reach out; we’re always here to help.