The Current Financial Position – June 2020
The OCR Holds
The Reserve Bank has decided to keep the OCR at 0.25 percent for now. Their reasoning was as follows…
“New Zealand has contained the spread of COVID-19 locally, for now, enabling relaxation of social restrictions and an earlier resumption of domestic economic activity than assumed in our May Monetary Policy Statement. The Government’s intended fiscal stimulus, announced in its May Budget, was also slightly larger than we assumed. These outcomes give cause for some confidence but significant economic challenges remain.” [source]
What does that mean for the future?
Well, the Reserve Bank will continue to monitor the economic status of the country. They are hoping that the Large Scale Asset Purchase (LSAP) program they have put in place will continue to balance economic risk. It is targeted to keep rates low for the foreseeable future in an attempt to strengthen the economy.
However, they will look to alternative measures in August if the LSAP program does not generate the results needed. There is always the potential for a further reduction in the OCR, so watch this space for now!
How Low Can They Go?
It seems that every month we are reporting a new historically low-interest rate and June is no exception. Mortgage rates have gone down again with all the banks shaving points off their fixed or floating rates.
Just how low can they go?
“Nikko Asset Management’s head of bonds and currency Fergus McDonald believes the concerted effort to lower interest rates will lead to even cheaper mortgages in the coming months.
“I still think there will be a further round of mortgage rate cuts in New Zealand,” McDonald said in a webinar. “The banks are awash with cash. They can borrow as much as they want really from the Reserve Bank at 25 basis points. It wouldn’t be at all surprising to me if we have mortgage rates at some stage starting with a one.”[source]
Mortgage Lending Up In May
There are signs that the property market is starting to recover after being put on pause during the nationwide Level 4 lockdown.
“Total mortgage borrowing hit $4.3 billion last month, up from $2.7 billion in April, according to the latest Reserve Bank data. The figures reflect a month where most New Zealanders were in lockdown under alert level three, before moving to level two in mid-May.
The data underlines a recovery from the depths of stricter lockdown levels, which halted most property market activity.” [source]
New listings are coming to the market again, with several regions of the country being tagged as buyer’s markets. So, there is definite activity out there. Plus, May was the first month that we saw the scrapped loan-to-value ratios that were previously in place.
If you are looking to explore your options at this time, then the Mortgage Suite team would love to sit down with you (or chat via phone) to discuss your current financial position and what might be possible.
Give us a call today!