Last Wednesday (the 4th of October) the Reserve Bank held the official Cash Rate which is now the third time they have hit the pause button since the unprecedented rise which has resulted in an 525 basis point increase which started right on 2 years ago (the first lift being the 6th of October 2021) and the last increase now being at the 5th of April review. There are still around 30% of all mortgages to come off low attractive interest rates which means that there will still be more pain to be felt.
Even though the cash rate has been kept stable for some time now mortgage rates are still trending up not just in New Zealand but also globally at present. The US economy is having some impact on our mortgage rates with very strong employment numbers coming out over the last couple of weeks. There are more commentators suggesting that we may still be in for a further increase to the cash rate on the other side of the election so the new review on the 29th of November is one to keep an eye out for and even if there is no change the commentary will give a good idea on how things are likely to play out for the first half of 2024.
Another key date coming up is the 17th of this month, when we will get an update on how the Reserve Banks battle with inflation is faring. I note commentary from a Kiwibank trader referencing that they believe an inflation number under 6% should mean no increase in the cash rate at the November review. For the many businesses who rely on customers discretionary spend they would welcome the respite in the lead into the Christmas season.
The migration boom we have experienced has removed a lot of the wage pressure from the economy with it now a lot easier to get skilled labour with only a net 8% of businesses stating in a recent survey that they were struggling to find suitable workers which is a substantial change from the 68% reported last year.
We are still leaning in most cases towards recommending the 1-year rate with the belief that rates should be starting to drop around this time next year however there are still risks which mean that this could get pushed out. Borrowers may wish to take a more conservative strategy and look to fix for 18 or hedge and break their mortgage into different parts and fix for different terms.
As always we do recommend clients have a review of their position with their advisor to ensure that their position is optimised. Please let
us know if you would like a review.