RBNZ begins “next phase of monetary policy easing”

What impact should we expect from the Reserve Bank of New Zealand's recent decision to reduce the official cash rate from 5.50% to 5.25? Not much, according to CoreLogic Chief Property Economist Kelvin Davidson.

Mr Davidson said little had changed as a result of the rate cut and the RBNZ's new, more pessimistic, economic forecasts.

“Most people had already been anticipating an easing in monetary policy at some stage soon, and this has now just been confirmed. Indeed, banks have already been lowering mortgage rates for some fixed terms, and this process looks set to continue – which will be a huge relief for many households,” he said.

“On the flipside, job security has dropped, and although the unemployment rate isn’t expected to spike higher, the generally softer labour market environment is still likely to be a restraining influence on house sales and prices. Debt-to-income ratio caps will have a similar effect as mortgage rates drop over the medium term.

“Overall, the next phase of monetary policy easing is here, and mortgage rates will drop over the medium term. But the RBNZ was keen to point out that it all still hinges on inflation ‘playing nicely’ (especially non-tradable / domestic price pressures), so that’s obviously a key factor to keep watching closely.”

With interest rates in a state of flux, it’s important for consumers to have access to a mortgage adviser who works with a diverse range of lenders. If any of your clients want to buy a property or refinance a loan, please introduce them to me.