Current Financial Position Explained – April 5th

The OCR

The Official Cash Rate was reviewed last week. As I explained last month, the OCR, or Official Cash Rate, is an interest rate set by the Reserve Bank. This rate affects all other interest rates offered by the various lenders in New Zealand. It is effectively the wholesale price for borrowing or lending money in New Zealand. It is set by the Reserve Bank to ensure that there is price stability for Kiwis.

This rate is reviewed 7 times a year to ensure that it is kept up to date with the current position of the country. The OCR is currently sitting at 1.75% and is expected to stay the same in this review. The position is that the rate will remain on hold for this year and next with an expected change in 2021. At this stage, it is not known whether that change in 2021 will see it go up or down.

So, what does that mean in real terms?

It will probably mean that we are going to enjoy the low-interest rates the banks are offering for a bit longer yet!

Interest Rates

Concerning interest rates, ASB have just reduced their 3 year rate to 3.95%, I believe other banks will follow.

Some banks are even offering rates below the 4% threshold or have a price matching policy to give borrowers the best deal. There are criteria that apply to obtain those rates, but the stipulations are reasonably easy to meet. That means most people will be able to enjoy amazing rates whether you are refixing your mortgage or looking at new borrowing.

If you are considering buying, topping up your mortgage, or renovating, then now could be the time to do it with such attractive rates on the market. Just remember to always take solid financial advice to ensure it is the best decision for your budget.

Using Financial Advisors

You may remember that last month there was a huge amount of backlash in the Australian market concerning banks and mortgage advisors. That kicked off a lot of talk here in New Zealand about the relationship between financial advisors and the Australian owned banks – ASB, ANZ, BNZ, and Westpac.

Currently, mortgage brokers are able to offer their services free of charge to the consumer market as they are remunerated by the various lenders when a mortgage is secured. There was talk of introducing a commission payable by consumers to keep fees transparent.

The Big Four banks have indicated they see huge differences in the New Zealand market compared to the Australian one. They have all voiced their support of mortgage brokers here in New Zealand.

BNZ said advisers play “an important role in enhancing competition in the home loan market. We will seek opportunities to learn from the Australian experience as we look for better ways to exceed our customers’ expectations. BNZ supports mortgage broking as an option for New Zealand home buyers.” (source)

Basically, it means that you can still enjoy the same support and advice you have been receiving from your mortgage broker for free. If you don’t have a reliable mortgage broker that you can call on, then please feel free to get in touch with us at Mortgage Suite. We would be more than happy to help with any queries you might have.