Have interest rates peaked?

It’s too early to say for sure, but there’s a good chance that if interest rates haven’t peaked already, we’re very close to the top of the cycle.

That comes after the Reserve Bank of New Zealand (RBNZ) decided, in July, to leave the official cash rate (OCR) at 5.50%, following 12 consecutive rate rises.

In a statement announcing the decision, the RBNZ gave no hint of further rate rises; instead, it noted that the series of hikes were “constraining spending and inflation pressure as anticipated and required”, and that “inflation is expected to continue to decline from its peak”.

(At the same time, the RBNZ made clear there would be no rate cuts soon, stating “the OCR will need to remain at a restrictive level for the foreseeable future”.)

A rate pause may be a double-edged sword for buyers

If we were at or near the top of the interest rate cycle, that would be good news for buyers, as it would put a ceiling on mortgage repayments.

However, this may be somewhat of a double-edged sword. That’s because buyer confidence may rise once people conclude interest rates have peaked. And if that happened:

• More buyer confidence could lead to more buyer activity.
• More buyer activity could lead to more buyer competition.
• More buyer competition could lead to higher selling prices.

So an end to interest rate rises may help trigger a rebound in property prices – albeit a “relatively subdued” one, as forecast by CoreLogic NZ Chief Property Economist Kelvin Davidson (see earlier story).

In that case, now may be the best buying conditions we’re likely to see for some time. If you want to take advantage, contact me to discuss your options. I can calculate your borrowing power, compare home loans and manage your loan application from start to finish.