PHOTO: ANZ New Zealand CEO Antonia Watson
The housing market and new mortgage lending are bright spots in an economy otherwise facing an enormous amount of uncertainty. Low mortgage rates are lending a hand, and monetary policy is expected to provide even more stimulus, with the OCR expected to go negative next year alongside a bank Funding for Lending Programme (FLP).
We expect the OCR will be lowered by 50bps to -0.25% in April, and that the FLP will strengthen the pass-through to retail rates. The impact of the combined policies is uncertain, but short-term fixed mortgage rates could dip below 2% next year. Further declines in mortgage rates will help to shore up the housing market, spending and confidence. But that’s set to go up against a range of dampening factors that are likely to become more evident by year end. Because of this, we expect that lower mortgage rates will provide a cushion, but won’t propel the housing market significantly. That said, there are offsetting forces and a ‘muddle through’ is possible. More broadly, risks to the economic outlook are tilted to the downside and it is possible that the OCR moves even lower than we currently expect.
See Feature Article: Lend me a hand for moreANZ-PropertyFocus-20200929.
