Two weeks ago, the RBNZ cut the OCR to 5.25% amid a flurry of interest rate changes both in residential mortgage rates and then the corresponding deposit rates. Even before the OCR announcement deposit rates were tracking down and we expect more cuts to come.
Many are predicting a further OCR cut in November of at least 0.25% This could bring with it some mortgage rates in the early to mid 5.00% range. If a retail bank was particularly aggressive in its market share a sub 5.00% early next year might not be off the table. Unfortunately, we don’t have a crystal ball, so time will tell.
These cuts can have a negative effect on term deposit rates and for anyone with term deposits maturing in the next six months. This could be the time to consider other lending options, just make sure you do the research before you make any changes.
Unfortunately, this will also be the time that scammers and fraudsters will prey on those with a nest egg to protect. Luckily there's been a significant jump in public awareness on how to watch out for scams. If you haven’t already, be sure to read, and share, our earlier blog on how to avoid scams here. It could save you, or someone you know, from potential losses.
There’s a lot of commentary around diminishing average property prices and the number of property sales per region. This, plus a decline in construction works throughout the country, adds to growing concerns about how this will impact future property prices.
However, we need to remember that we are coming out of winter and if you were to re-read property commentary from this time in previous years, you’ll find they have a similar theme. The seasons very much affect the property market, so take any real estate news headlines with a pinch of salt (and an umbrella) and beware of click bait headlines posing as news.
That said, it’s hard to ignore building industry stats coming out of interest.co.nz, which recently reported that building work was slowing to a trickle as more projects are cancelled or put on hold.
A report funded by the BRANZ Building Research Levy surveyed over 650 New Zealand building firms and found that from the peak of 2022, on average, building firms are operating at just 67% of capacity. Of the builders surveyed, 70% believed the next 12 months would see industry conditions decline.
The recent steady decline in mortgage interest rates should stimulate house sales. However, house prices may not be immediately impacted as prices could remain flat until the end of the year.
In New Zealand, we have a history of very large swells in any direction when it comes to property; when it’s up, it skyrockets and when its down, it can be a fast descent.
We know what’s kept SCP on an even keel through the peaks and troughs: conservative LVRs and stringent loan management.
Stick to the basics and you rarely get it wrong.