A financial adviser says New Zealanders could be in for some relief later this year in the wake of the Reserve Bank's latest official cash rate update.
EnableMe founder Hannah McQueen told Breakfast it is positive news for home owners and those who want to sell property later this year.
McQueen said based on the economic outlook shared by RBNZ on Wednesday when it held the OCR at 5.5% - which signalled inflation could return to the target 1 to 3% band later this year - she said there potentially could be 0.5% cuts in the OCR in both November and February.
“For many homeowners, [this is] a game changer, and a mindset shifter.”
Yesterday, Westpac NZ made cuts to its interest rates for mortgage holders, along with term deposits.
McQueen said she expected other banks to soon follow suit.
“In the next couple of months you’re going to see them start to compete, and you’ve got the OCR wanting to drop which is going to force them to drop.”
For those who are about to re-fix their mortgage, McQueen advised to look at the current six-month and year-long rates and see if it is viable to fix shorter term to enjoy potential cuts sooner.
“But if your situation is really tight you might have had to fix for a longer period of time, so you’re not going to benefit from these immediate drops.”
House prices could go up
McQueen said when interest rates dropped, house prices often go up.
“It’s almost like this pigeon economic law that for a 1% drop in [interest rates], that’s followed by a 10% lift in house prices.”
As a result of this likely change, McQueen suggested “now is the time” to buy for those who want to take advantage of the currently lower prices.
People will want to spend
With the cost of living biting for what feels like an eternity, McQueen said people will want to spend should interest rates fall.
“I imagine holidays will increase, car purchases will increase.
“But this is an opportunity to make some smart financial decisions, if you’re used to spending less perhaps due to the cost of living tightness, perhaps hold on a little bit longer and let this be an opportunity to jump your household ahead.”
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