The big question a lot of our mortgage brokers get asked is “What is the interest rate doing?”
One of them even invested in a crystal ball to check it every other day, but seriously. It’s one of those questions which isn’t always easy to answer unless you know the future. If the last 10 years shows anything about interest rates and the property market it shows us that any predictions are more likely to be wrong rather than right, but we can work with the information we have.
Interest rates are affected by many things, one being the Official Cash Rate. The Reserve Bank of NZ uses this to control the cost of borrowing which in turns affects the amount of borrowing and subsequently the amount of spending in the economy. It’s the amount of spending that affects the rate of inflation (ever-growing rate of cost of goods and services we use).
Currently with inflation being the highest it has been in over 20 years in NZ around 7% for the start of the 2022 year. We are seeing a big boost from the reserve bank to try to keep that under control by increasing the OCR which then increases the interest rates which we borrow at.
With more OCR hikes predicted to increase again at some stage over the coming year. This will directly impact the floating interest rates and short-term fixed rates and increase the overall cost of borrowing, so what can we do?
Well, if you are like one of those people who got some good solid advice and fixed their rates early you are all set… for now. Someone whose rates are coming up to review or you are new to the market or looking at buying a property or first home would be a good idea to speak to a lending specialist and get some qualified advice for your situation.