- TONI DAWSON, a fully-qualified Mortgage Adviser with more than 15 years’ industry experience, shares her expertise.
As I write on October 8, I, along with many other Kiwis, am eagerly awaiting the next Official Cash Rate (OCR) announcement from the Reserve Bank on October 9.
The consensus is the RBNZ will drop the OCR by 0.25 per cent or 0.5 per cent – from 5.25 per cent. But there’s calls from some industry players to drop it by 0.75 per cent.
On March 16, 2020, the OCR was dropped by 0.75 per cent – from 1.0 per cent to 0.25 per cent.
We then saw New Zealand banks drop their one-year fixed rates – from around 3-2-3.4 per cent per annum to 2.1-2.5 per cent per annum in July 2021.
The OCR was held at 0.25 per cent until October 6, 2021, when it was increased to 0.5 per cent.
We then saw successive OCR increases over the next two years. The RBNZ then held the OCR there, at 5.50 per cent, until the 0.25 per cent drop on August 14.
Why is this relevant?
In March 2020, the average house price across New Zealand was $748,115 (according to QV).
On March 16, 2020, the OCR dropped by 0.75 per cent to 0.25 per cent.
It remained at 0.25 per cent until October 6, 2021. That month, the average house price was $1,002,153 – an increase of nearly 34 per cent – because money was cheap.
House prices then peaked a few months later in January 2022.
We also saw the rate of inflation go from 1.5 per cent in June 2020 to 3.3 per cent in June 2021, to 7.3 per cent in June 2022.
And it’s taken the last two years to bring this back within the target range of 1 to 3 per cent*.
Whilst the RBNZ fought the “war on inflation” every single one of us experienced the “cost of living” crisis.
We also saw a fairly dramatic fall in the average house price to $888,930 in May 2023.
Do we want another “hard and fast” fix? Or a more measured approach? Don’t forget, there’s another OCR announcement on November 27. And then again on February 19, 2025. And every six weeks thereafter.
*June 2024 quarter was 3.3 per cent. September figures will be released on October 16, but it’s expected to be less than 3 per cent.
- Toni Dawson NZCFS Level 5, BBS, GradDipBusStuds (Personal Financial Planning) FSP1000506
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