Key Facts:

  • Economists are divided on whether the Official Cash Rate (OCR) in New Zealand will remain at 5.5% when the Reserve Bank meets in February 2024.
  • Mortgage interest rates could still rise, even if the OCR remains unchanged, due to high competition for term deposits and rising wholesale rates globally.
  • Approximately 30% of mortgage holders are due to roll onto higher rates in the next few months, causing financial strain.
  • The Reserve Bank’s actions have brought down inflation, but there is still progress needed for it to fall within the 1-3% band.
  • ANZ economists note that fixed mortgage rates have been rising without changes to the OCR.

Article Summary:

Economists are attempting to predict whether the Official Cash Rate (OCR) in New Zealand will remain at 5.5% or rise even higher when the Reserve Bank meets in February 2024. While some believe the OCR has peaked, they warn that mortgage interest rates could still increase because banks source much of their lending from wholesale borrowing offshore and money deposited with the banks, which are not directly affected by the OCR. Approximately 30% of mortgage holders are set to face higher rates in the next few months, leading to financial difficulties regardless of whether mortgage rates rise again. ANZ economists have observed that fixed mortgage rates have been rising steadily without changes to the OCR, indicating ongoing pressure on homeowners. However, economists note that the Reserve Bank’s actions have helped bring down inflation, and they expect interest rates to start falling from May 2024 or later.

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