fbpx

    Phone consultation!

    Thank you for contacting Global Finance. One of our experienced advisors
    will contact you shortly.

    As a first-home buyer or an existing mortgage holder, staying informed about your mortgage repayments, especially the factors that can impact interest rates, is important.

    You’ve probably heard various opinions on whether rates have peaked or if there’s a possibility of further increases. And while many claim that interest rates have peaked in New Zealand, at Global Finance we believe they may continue to rise.

    Aseem Agarwal, our Head of Mortgages, provides some valuable insights on why he thinks this may be the case and the impact this will have on the refixing of mortgages.

    Domestic OCR and inflation

    When talking about interest rates, most people focus on the domestic OCR (Official Cash Rate) set by the Reserve Bank of New Zealand (RBNZ). The OCR represents the cost at which banks borrow or lend money. Basically, lower OCR rates make loans more affordable, while higher rates make borrowing more expensive. The Reserve Bank utilises the OCR as a tool to control inflation. By increasing the OCR, it hopes to reduce spending and borrowing and thereby curb inflationary pressures.

    The OCR currently stands at 5.5%. Based on the assumption that sufficient measures have been taken to tame inflation, this rate is not expected to increase. Inflation in New Zealand was 6.7% for the year ending March 2023. More up-to-date inflation figures will be released shortly and will provide a clearer picture, but most economists predict a decrease in inflation to around 6.2%. The BNZ’s research team sees the rate of inflation coming down to 4.5% by the end of the year. However, only time will tell.

    The Global impact

    As well as domestic inflation, inflation rates in overseas countries such as Australia, England, and the US also have a significant impact on interest rates in New Zealand. “The main reason we feel that interest rates will go higher is that inflation is still running high in overseas countries such as Australia, England, and the US,” Aseem tell us.

    The news from these countries indicates that interest rates haven’t yet reached their peak over there. Over the next 4 to 6 months, we might witness rate increases in these countries as the Reserve Banks of Australia, England, and the US gradually raise their rates.

    The crucial point to understand is that when New Zealand banks provide funding, not all of it comes from local sources. Approximately 20 to 30% of funding is obtained from overseas, specifically Australia, England, or the US. If the cost of borrowing increases in these overseas markets for New Zealand banks, logically some of this cost will be passed on to consumers in New Zealand through higher retail rates.

    Implications for homeowners

    Interest rates currently sit around 6.9% to 7%. Aseem predicts, “It is likely that these rates may touch 7.25 to 7.50% by the end of December 2023 or January 2024.” Many in the market are hoping for a turnaround in interest rates in a year’s time; that interest rates will begin dropping.

    However, if interest rates continue to rise over the next 4 to 6 months, as we predict, they are likely to reach their peak by December or January and then remain unchanged for the following six months.

    In such a scenario, any downward movement in interest rates will likely occur in the latter half of 2024, not earlier as many are touting.

    Assessing when to refix your mortgage

    As a first-home buyer or a mortgage holder, it’s a very good idea to be mindful of potential interest rate movements, particularly when looking to refix loans.

    Aseem believes that any downward movement in interest rates favouring borrowers may be a considerable time away. He explains, “In our experience, the pace at which rates go down is always slower than the pace at which they go up. So ideally, to see any reasonable movement in the interest rate in a downward cycle will be at least 18 months away. When people are thinking about refixing their loan, they need to keep this in mind and perhaps think whether a 12-month, 18-month, or 24-month rate might be a better option.”

    While shorter-term refixing options may seem attractive, it’s important to think beyond the immediate future and we recommend you take this timeline into account. You may position yourself better by opting for a longer-term refixing period, such as 18 or 24-month rates.

    Trust Global Finance for guidance and support

    The complexities of interest rates and mortgage decisions can be more than a little off-putting for many. We get that, and that is why we’re here to provide answers, support, and tailored guidance.

    “The need for a comprehensive understanding and proactive decision-making is vital for first-home buyers and mortgage holders alike.”

    Our experienced team, led by Aseem Agarwal, Head of Mortgages, can help you make informed decisions so you can secure the best deal in an ever-changing financial market.

    We understand the concerns and considerations of first-home buyers and mortgage holders, and we’ll take the time to understand your situation and offer practical advice that aligns with your financial goals.” Contact us today to book a no-obligation chat.

    The information and articles published are true to the best of the Global Finance Services Ltd knowledge. Since the information provided in this blog is of general nature and is not intended to be personalized financial advice. We encourage you to seek Financial advice which is personalized depending on your needs, goals, and circumstances before making any financial decision. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.

    January
    January
    February
    March
    April
    May
    June
    July
    August
    September
    October
    November
    December
    2025
    1900
    1901
    1902
    1903
    1904
    1905
    1906
    1907
    1908
    1909
    1910
    1911
    1912
    1913
    1914
    1915
    1916
    1917
    1918
    1919
    1920
    1921
    1922
    1923
    1924
    1925
    1926
    1927
    1928
    1929
    1930
    1931
    1932
    1933
    1934
    1935
    1936
    1937
    1938
    1939
    1940
    1941
    1942
    1943
    1944
    1945
    1946
    1947
    1948
    1949
    1950
    1951
    1952
    1953
    1954
    1955
    1956
    1957
    1958
    1959
    1960
    1961
    1962
    1963
    1964
    1965
    1966
    1967
    1968
    1969
    1970
    1971
    1972
    1973
    1974
    1975
    1976
    1977
    1978
    1979
    1980
    1981
    1982
    1983
    1984
    1985
    1986
    1987
    1988
    1989
    1990
    1991
    1992
    1993
    1994
    1995
    1996
    1997
    1998
    1999
    2000
    2001
    2002
    2003
    2004
    2005
    2006
    2007
    2008
    2009
    2010
    2011
    2012
    2013
    2014
    2015
    2016
    2017
    2018
    2019
    2020
    2021
    2022
    2023
    2024
    2025
    2026
    2027
    2028
    2029
    2030
    2031
    2032
    2033
    2034
    2035
    2036
    2037
    2038
    2039
    2040
    2041
    2042
    2043
    2044
    2045
    2046
    2047
    2048
    2049
    2050
    MonTueWedThuFriSatSun
    30
    31
    1
    2
    3
    4
    5
    6
    7
    8
    9
    10
    11
    12
    13
    14
    15
    16
    17
    18
    19
    20
    21
    22
    23
    24
    25
    26
    27
    28
    29
    30
    31
    1
    2
    00:00
    01:00
    02:00
    03:00
    04:00
    05:00
    06:00
    07:00
    08:00
    09:00
    10:00
    11:00
    12:00
    13:00
    14:00
    15:00
    16:00
    17:00
    18:00
    19:00
    20:00
    21:00
    22:00
    23:00