Mortgage Advice Blog

You may have seen plenty of commentary about further interest rate drops in the media over the last few months. There are signals from the Reserve Bank that further drops in the Official Cash Rate (OCR) will be likely towards the end of the year. So what is causing the drop in rates?
 
Slowing of economic growth has been cited as a reason, due to falling dairy prices along with the Christchurch Rebuild appearing to have peaked. Inflation has remained unremarkable at 0.3 percent, which is below the Reserve Banks 1 – 3 percent target. 
 
The Reserve Bank forecast inflation would rise by early 2016 because of the fall in the dollar, though it was unsure how quickly that would flow through into higher prices. The lower dollar will help exporters compete against their foreign rivals but the Reserve Bank believes the currency will fall even further given the weakness in commodity prices.
 
House prices are also pretty static apart from Auckland and certain parts of Christchurch.  The Reserve Bank is introducing measures to curb riskier lending, for Auckland at least the only solution to the rapidly increasing prices is to build more houses.
 
Economists are mixed about how low The Reserve Bank will go, some analysts are picking that the OCR will head back to its record low of 2.5 percent, although we wouldn’t be surprised to see it hit 2 percent by the end of the year.
 
So what does this all mean for your mortgage? Give me a call or reply to this email and I’ll talk you through it.

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