In this episode, we dive deep into how historical and recent interest rate trends impact your mortgage and overall financial planning. From the high rates of the past to the easing trends today, we’ll help you navigate the shifting landscape and make informed decisions for your financial future.
• Indirect Influence: The OCR doesn’t directly set most interest rates but guides where the Reserve Bank aims for them to be. It influences market expectations and can indirectly affect borrowing costs.
• Bank Funding: Banks typically source their funds from the overnight international money market and swap rates rather than directly from the Reserve Bank.
• Pre-2008 Environment: Before the global financial crisis, New Zealand enjoyed a period of economic stability with relatively low interest rates.
• Post-Crisis Adjustments: In the aftermath of the crisis and the COVID-19 pandemic, interest rates were slashed to stimulate economic activity. However, this contributed to rising inflation and soaring property prices.
• Current Situation: Recently, interest rates surged as a response to persistent inflation, leading to higher mortgage repayments and financial strain for borrowers.
• OCR Adjustments: Recent reductions in the OCR indicate a potential easing of financial pressures, with a possible downward trend in floating interest rates.
• Swap Rates: A decline in swap rates has also influenced borrowing costs, making short-term borrowing options potentially more attractive.
• Future Predictions: Experts anticipate continued adjustments in interest rates, with a forecast for lower rates in the near future. This could impact how borrowers plan their mortgage strategies.
• Managing Mortgages: Consulting a mortgage broker is highly recommended to tailor a strategy that fits your current financial situation and the prevailing market rates.
• Short vs. Long-term Fixes: With expectations of lower rates ahead, opting for shorter-term mortgage fixes may provide better flexibility and cost savings compared to locking in for longer periods.
This episode offers essential insights into the evolving landscape of interest rates and their broader economic impact. By understanding these trends, individuals and businesses can make more informed decisions about managing their mortgages and financial planning.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
