PHOTO: EnableMe founder Hannah McQueen. TRADEME
Financial Relief on the Horizon for New Zealanders: Insights from a Financial Adviser
New Zealanders may soon experience financial relief, according to insights from a recent update on the Reserve Bank’s official cash rate (OCR).
Hannah McQueen, founder of EnableMe, shared positive news for homeowners and prospective property sellers on Breakfast. The Reserve Bank of New Zealand (RBNZ) maintained the OCR at 5.5% in their latest update, suggesting that inflation could fall within the target range of 1% to 3% later this year. McQueen anticipates potential cuts of 0.5% in the OCR in both November and February.
“For many homeowners, [this is] a game changer, and a mindset shifter,” McQueen said.
Westpac NZ recently reduced its interest rates for mortgage holders and term deposits, and McQueen expects other banks to follow suit. She predicts increased competition among banks in the coming months, driven by the anticipated OCR reductions.
For those about to re-fix their mortgages, McQueen recommends considering current six-month and one-year rates to potentially benefit from the expected cuts sooner. However, she cautions that those with tighter financial situations might need to fix for a longer term and may not immediately benefit from these drops.
Potential Rise in House Prices
McQueen pointed out a likely increase in house prices as interest rates drop. “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,” she explained. Consequently, she suggests that now might be the time for potential buyers to take advantage of the currently lower prices.
Increased Consumer Spending Expected
With the cost of living putting pressure on many households, McQueen expects a rise in consumer spending should interest rates fall. “I imagine holidays will increase, car purchases will increase,” she said. However, she advises making smart financial decisions. If households have become accustomed to spending less due to the high cost of living, maintaining that frugality a bit longer could provide an opportunity for financial advancement.
In summary, the RBNZ’s latest OCR update offers a promising outlook for New Zealand homeowners and the broader economy. Lower interest rates could provide significant relief and opportunities, prompting a potential rise in house prices and increased consumer spending.
SOURCE: 1NEWS