Interest rate outlook for the year ahead.
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Yesterday it was announced the Reserve bank, as widely predicted held at the Official Cash rate (OCR) at 0.25%. This is largely due to the New Zealand Economy's resilience and future forecast's showing promising signs. The stimulus provided by government has done its job and with Covid vaccines beginning to role out it's hopeful we may be past the worst when considering the economic effects of the virus. However, the RBNZ is in a very cautious position in regards to housing and the property market, do too much too quick and cause an unmanageable correction, not do enough and the gap in homeownership could widen even further. Overall without significant change it is widely assumed interest rates are currently at or near to the lowest predicted point and in the long term rate increases could be on the cards. The long discussed and mythical "negative" rates have for now been taken off the table.
Mortgage Rates Short term rates may still see some movements as lenders compete amongst a strong property market. However these changes will be very minimal and likely require borrowers to have lower LVR positions if your looking for the best deal possible. It's important to consider the overall state of the property market when thinking about your personal mortgage rate, in current market conditions, there is no need for lower interest rates so trying to wait out a lower short term rate may not be the best move. In the Medium to long term rates, these will likely remain flat before we see small increases over time however we are already seeing long term rate increases in 5 year rates. Long term rates are currently offering certainty for borrowers and the ability to adequately manage regular budgeting for households.
You can review current overall interest rates here, remember these are subject to change and may not be appropriate to your scenario: www.tribefinancial.co.nz/lending
So, what to do with my mortgage?
Unfortunately, there's no hard and fast rule, and its crucial you consider your overall financial position and cash flow when developing your mortgage strategy. While minimizing interest in the short term can be rewarding, there is no guarantee that in 12 months interest rates will be at similar rates to present. Be realistic with your budget and plan, it's time to factor in interest rate increases and what that looks like for your cash flow. Maybe it's considering a split mortgage, fixing some for a long term to provide certainty, while leaving some on short term to provide interest savings. Remember that every household's situation and financial circumstances are different, and if it all seems too complicated, that's what we are here for! Our advisors are actively watching interest rates and market changes and can tailor your lending to suit you, we work with borrowers to understand there position and how a mortgage can work for you, not the other way around, and best of all, it wont cost you a cent.
Disclaimer: This publication has been prepared for your general information. While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions. This publication does not constitute financial or insurance product advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. Disclosure statements relating to any financial advisers associated with this newsletter are available on request and free of charge. Tribe Financial is no way related to any entities discussed in this publication.