The Current Financial Position Explained – August 2020
What Is Happening To The Economy?
It is no surprise that the economy has had another wobble with the reinstated lockdown procedures in Auckland, and level 2 restrictions in the rest of the country.
Business confidence is low as trading feels uncertain. It is hard to predict what the future might look like with the ever-present threat of COVID in the air. Will we need further lockdowns? How will this impact businesses, jobs, and communities?
Unfortunately, no one really knows what the future holds on this front. What we do know is that the economy has already started to contract. And it has done so at a pace steeper than we have seen in the last 3 decades. We expect to see more of this in the coming months, with the economy projected to contract 5.5% in 2020. [source]
What does a contracting economy mean for the average New Zealander?
Well, if you cast your mind back to the global financial crisis of 2008-09, it could be something like that. Unemployment will likely rise, imports and exports will be impacted due to many international borders closing, and GDP is set to decline.
Now is a really good time to seek advice on any financial moves you are considering making. An independent financial adviser can help you to understand what your position is and what external factors can influence it. The team of expert financial advisers at Mortgage Suite would be more than happy to help you navigate the current financial situation. Get in touch with us today.
Negative OCR – What Does It Mean?
With the return of COVID-19 to New Zealand’s shores, economists are buzzing with what that might mean for the economy. The widely accepted opinion is that the Official Cash Rate (OCR) will reach a negative value early in 2021.
“The key message from the RBNZ last week was that they are prepared to pull out all the stops to get NZ interest rates lower and support the economy,” the economists added. “The Bank’s quantitative easing programme was ramped up by more than anyone expected and the chances we see negative interest rates next year are now much higher.” [source]
So, what would a negative cash rate mean?
Well, for a start, mortgage rates are likely to drop again. We may even see the rates down below 2% in 2021. While this is great for borrowers, what does it mean for savers?
The banks are not intending to charge you to keep your money in a savings account. However, savings interest and term deposit rates are likely to take another hit. If you do have funds saved, then term deposits may not be the best option for your situation. Have a chat with a financial advisor, like the team here at Mortgage suite, to explore what options are available for your nest egg.
If you need to know more about your options for your current situation, then get in touch with us here at Mortgage Suite for a free no-obligation chat.