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Interest rate update - September

September 9th, 2021.

Level 4 Lockdown – it’s been over a year since we’ve been here, and I don’t think any of us expected to be back here in a hurry! We definitely took our freedoms for granted!
 
The big news recently in the interest rate market has been the fact that the Official Cash Rate (OCR) has remained at 0.25% per its review on the 18th August 2021. Typically OCR reviews are scheduled every 6 weeks but this time round it was just over a month since the last one on 14th July.
 
There was somewhat a unanimous expectation by market commentators that we were expecting an increase – some even suggesting it could be as high as a 0.50% hike to the cash rate, due to results of inflation statistics released in July with inflation at a 10 year high.
 
As a result – mid July many banks priced this into their rates and the cost of funds went upwards at a rapid rate, in most cases banks went up by 0.30% - 0.36% higher per annum, depending on the fixed rates, and in some cases higher.
 
However, now that we are in lockdown and due to the fact there are concerns around the spread of the Delta variant in NZ – forecasts may change in terms of the timing (of OCR increases). So far most banks haven’t dropped rates back down – apart from ANZ who have dropped their 1 and 2 year rates very slightly - (others have gone upwards on some fixed terms slightly) but with the current environment it is possible we may see some downward pressure on rates as the economy takes a hit – particularly with recent case numbers.
 
Most major AU/NZ banks have their fixed interest rates priced between 2.39%-3.69% depending on the bank and the fixed rate from 1-5 years.
 
It’s quite interesting too however to see some non-bank lenders such as Resimac and some of their competitors, have cheaper 5-year rates than most of the banks presently (e.g. Resimac and Select Home Loans at 3.54% at lower LVR’s).
 
The difficulty when looking at rates currently is trying to figure out if we will see the expected OCR increases which would have an influence on borrowing costs. It’s clear that the RBNZ does want to hike the OCR in the near future, however the unknown we all have to face is just how long we’ll be in lockdown and how long the Delta variant will cause interruptions to these intended plans and the performance of the NZ economy.
 
Historically these are still very good rates – and it’s another reason why we are strongly recommending that borrowers review their situation and determine what’s suitable for them. For any uncertainties – get in touch with us at info@krispedersen.co.nz
 

- Kris

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Kris Pedersen Mortgages Limited

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