On the 8th of May 2019, the Reserve Bank of New Zealand announced the Official Cash Rate (OCR) had been reduced to 1.5%, a 25-basis point cut, due to longstanding price stability.
This announcement brings with it the first change in the OCR since it was reduced from 2.00% to 1.75% in November 2016. The new rate is a record low for New Zealand and has had an immediate effect on mortgage rates offered by New Zealand Banks.
Following the Reserve Bank’s decision, ANZ, Westpac and Kiwibank were quick to announce cuts to their own mortgage rates.
With the OCR being so low, it is making it easier for first homeowners to borrow money from the bank and for existing homeowners, it presents an opportunity to increase their payments and pay off their home loans faster by having more of their repayments going towards the principle and not on interest.
However, with such opportunity also comes an adjustment in lending criteria, as banks tighten up the requirements and allowances given to home loan borrowers. Mortgage rate wars are already so strong between banks and this decrease in the OCR will continue to see competition.
The current borrowing environment sits steady with borrowers having more favourable outcomes, especially over the next 1-2 years.
Many economists predict that there is still a 50% chance the OCR rate will be cut again by the end of 2019 due to the current position of the global markets. If this even more record-breaking cut does occur, we will no doubt see more significant changes from banks and an impact will further influence property prices.
If you are interested in finding out more about the OCR changes, or how they affect you, your current home loan or you are looking at buying your first home, book an introductory appointment with our in-house mortgage broker and Authorised Financial Adviser, Brayden Judd.