In The News - The OCR update and you

In The News - the OCR update and your mortgage

Last week the Official Cash Rate (OCR), FINALLY dropped, and for those wondering what that means, it means that money is finally getting cheaper for us! The OCR has gone from 5.5 to 5.25%, with the expectation from some commentators that it could get down as low as 2.75%, maybe even around 3%.

Interest Rates - the good, the bad, and the ugly

So, the Reserve Bank has finally acknowledged that the economy is not doing well and that it needed to add some stimulus back into the economy (duh!)

As a result of the dropping OCR, banks have also come to the party dropping their interest rates, which is fantastic, because over the last couple of years, rates have been historically high for kiwis and we’ve been doing it tough.

Those of us who’ve been managing our mortgages through the COVID period on great rates of around 2.99%, have been coming off our fixed-rates and having to refix at rates of around 6.99% or higher! And when you do the math on that, you quickly realise that your very cheap mortgage has become very, very expensive – the bad, and the ugly!

Now the good - what this all means for interest rates is that at the moment you can fix in a One-year-rate for under 7%, and that could mean that in another 12-18 months you could be getting a One-year-rate for under 5%. Yes, our mortgage payments are about to decrease.

House prices

Remember, that with a drop in interest rates, house prices can start to move up again.

Do I think they're going to explode and go forward 100 miles an hour like they did in the Covid period? No.

But they probably will start to stabilise now, and they probably won't fall any further than what they already have, with incremental rises starting.

Next steps for existing mortgage holders

If you’re an existing mortgage holder, this is all great news. Basically, you can just hold on. Rates are going to continue to drop, in fact they’re dropping just about every week. We’re getting notices weekly from the main banks that they’re moving their rates down.

Have that conversation with a Broker, like Quantum, early, at least a couple months before you’re due to refix so you get weigh up all your options.

Here’s a few quick reminders why using a Broker (Financial Adviser) is a no-brainer:

1. Free service: we’ll see how your existing rate compares with the new rates available. With recent changes, there might be opportunities to secure a better deal, and we do this all for free as part of our Mortgage Servicing.
2. Review your financial situation: we’ll assess your current financial situation and future plans. This will help you decide if a longer or shorter term, or a fixed vs. variable rate, is right for you.
3. Unbiased options: we can take you through different mortgage lenders, products and terms. This might be a good time to switch to a different type of mortgage or lender to better suits your needs. We can show you the number comparisons on how much a mortgage could cost you now, and what it could cost you in 6-12 months time.
4. We negotiate for you: we’ll reach out to your current lender to discuss what competitive rates or incentives they will provide to keep you on board.
5. Professional advice: we provide tailored advice and help you navigate the best choices for your situation.

So, if you're an existing mortgage holder and wanting to review things, please reach out to us. It could be that it's time for you to review your relationship with your current bank. You might want to take a look at what’s your best direction, interest rate wise. We’re here to help you do that.

Next steps for First Home Buyers

If you're looking at buying your First Home, what these drops mean for you, is there’s some real confidence to act there. Everyone’s probably been telling you that it’s too expensive, its too hard, and you should just wait.

Now’s actually a great time to see just how close you are to making your homeownership dream a reality. You can literally fix for a rate of 6.85% for 6 months at the moment, safely telling yourself this rate is your worst case scenario, as you could almost guarantee that in another 6 months time, your rates will drop again.

Yes, rates are only going to get cheaper from here, over the next 6-18 months when this rate cycle has flattened out, and rates have reached a bottom-point, you won’t regret making a move now if you’re ready to go.

So, if you’re a potential First Homebuyer, and you've been thinking about getting into the market, engage with us. Give us a call, that’s what my experts are here for. I’ve got some great people that would love to sit down with you and have this conversation. You'd be surprised how often we see clients who are much closer to a pre-approval than they thought! And that could be you - let's find out.