Yesterday, the Reserve Bank of New Zealand raised the Official Cash Rate (OCR) to 5.25%, which was higher than the 0.25% increase that most economists had predicted. The last time the OCR was this high was during the Global Financial Crisis in 2008-2009.
The Reserve Bank is concerned about inflation in New Zealand being too high and not within the acceptable level of 1-3%. Therefore, they want to take strong measures to tackle inflation and bring it down to more manageable levels quickly. It is possible that the country may officially enter a recession by May 2023.
For homeowners with mortgages, this means that about 55% of the $310 billion in mortgages will come up for renewal in the next six months. This will likely result in many homeowners feeling the financial strain in the coming months, with over half of their incomes going towards mortgage repayments.
Despite concerns, some economists predict that we have reached the peak of interest rates and that they will not go much higher than they currently are. Additionally, it is being forecasted that interest rates will start to decrease sometime next year, so the current high interest rate environment is expected to last for about a year.
Regardless of where interest rates stand, homeowners can always consult with a Global Finance Mortgage Adviser to determine the best option for them in terms of refinancing their home loan, understanding how to keep loan repayments affordable, or how to pay off the loan faster. To speak with an adviser, call 09 255 55 00 today.
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