OCR Reaches Its Highest Level in 15 Years, Signaling Increased Mortgage Challenges

PHOTO: National’s Finance spokesperson, Nicola Willis. GETTY

National’s Finance spokesperson, Nicola Willis, expressed her concern over the Reserve Bank’s decision to maintain the Official Cash Rate (OCR) at a 15-year high. She stated, “Today’s choice to retain the OCR at 5.5 percent is unwelcome news for New Zealanders with mortgages. They will continue to grapple with these elevated interest rates for an extended period, becoming inadvertent casualties of the Labour Party’s fiscal management and extravagant spending.”

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Willis pointed out that the Labour Party’s spending had surged despite rising inflation, forcing the Reserve Bank to escalate interest rates at an unprecedented pace. She cautioned that a re-elected Labour government might follow a similar course. She said, “New Zealand mortgage holders cannot afford another term under a Labour-led government focused on significant spending and taxation increases.”

She referenced Westpac’s warning about the Labour Party’s fiscal plan, quoting, “Westpac suggests that the risk associated with the Labour Party’s fiscal plan leans toward a weaker fiscal position compared to parties with more conservative economic approaches.” Additionally, Willis highlighted the potential fiscal pressure from coalition negotiations with the Greens and Te Pāti Māori, especially due to Labour’s rejection of a wealth tax, which the other parties had proposed as a revenue source for their ambitious spending plans.

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Willis urged New Zealand mortgage holders to evaluate the Labour Party based on its track record of imposing record-high interest rates:

The OCR is currently at its highest level in nearly 15 years, surpassing rates in Australia, the United Kingdom, Canada, and the European Union.
The OCR has surged from 5.5 percent in less than two years, marking the fastest rate increase in New Zealand’s history.
The latest advertised average special interest rate for a two-year fixed mortgage on residential properties has risen to 6.8 percent, a significant increase from 2.9 percent two years ago.
Consequently, the fortnightly interest costs on a $500,000 mortgage have surged from $550 to $1,300 in that period, pushing many homeowners into arrears.