RBNZ keeps official cash rate on hold at 1.75% for 12th consecutive time
Kelvin Davidson comments:
Rates were last changed in November 2016 with a 0.25% cut. The last time rates were increased was over four years ago, in July 2014. With both NZ’s unemployment and inflation rates still low, the requirements of the RBNZ’s dual mandate are still being met with interest rates at current levels.
Although the balance of risk suggests that the next OCR move will be upwards, that move isn’t likely for at least another 18 months. Indeed, the RBNZ noted that they “expect to keep the OCR at this level through 2019 and into 2020, longer than we projected in our May Statement”. On its own, this signals little danger of a large or rapid increase in mortgage rates this year or next. That will help to bolster property demand.
In fact, we shouldn’t rule out an OCR cut altogether either. To be fair, the chances of that happening are still slim. But if the slump in business confidence continued and eventually drove job losses for example, that could be one possible trigger for a lower OCR.
Overall, there is nothing to suggest an imminent threat to New Zealand’s property values. Looking at Auckland in particular, this period of stability for mortgage rates and property values is giving households some timely breathing space in which to bolster their balance sheets. Existing borrowers have had some time to try and make a dent in their mortgage, while some prospective new buyers will have been able to take a bit more time to save a larger deposit.
Contact: Kelvin Davidson, Senior Research Analyst, CoreLogic.
Mob 027 355 3813, email [email protected]
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