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July 2023 - OCR Review

By Kris Pedersen - July 17th 2023

Official Cash Rate Review - July 2023

As expected the Reserve Bank held the Official Cash Rate at 5.50% yesterday. This marks the first time in almost 2 years that they will not have hiked with a staggering 525 basis point increase over that time.

Recent commentary from Westpac stated that since late 2021 the average New Zealand household has only felt 120 basis points of this increase but with roughly half of all fixed mortgages due to be refixed over the next 12 months this average will increase by a further 150 basis points over this timeframe.

Many household budgets that are already feeling the strain are likely to be pushed exceptionally tight. Unfortunately business such as retail and hospitality which rely on these households discretionary expenditure which in many cases will now be zero are also going to struggle with may likely to go under.

This is shown clearly by a recent Xero survey where nearly half of small business owners and almost 60% of sole traders weren’t paying themselves so they can keep their businesses running.

Mortgage arrears are now quickly climbing and are almost at levels not seen since 2015. They were coming off a very low base but are almost 50% higher than the start of the year so the rate hikes are definitely hitting the mark.

The key date to watch out for is actually next Wednesday when we will see how inflation is at.

We will release some more commentary once we have had a chance to look over this but to finish with some key points if your rates are due shortly:

If you'd like a free review of your current situation, please feel free to get in touch here.