Recently, ASB released its March Home Loan Rate Report which makes for interesting reading, especially if you currently have a mortgage and are wondering what your interest rate is likely to do over the next couple of years. While it’s never possible to predict interest rate movements with complete accuracy, ASB’s economists have studied recent trends and the economic climate carefully to come up with an educated estimate of likely future changes.
Looking back over the last year, interest rates have stayed stable at low levels. There are two reasons for this. Firstly, New Zealand’s Official Cash Rate (OCR) remained at the record-low level of 1.75%, where it has sat unchanged since November 2016. Secondly, it’s been easier for banks to obtain money to lend without having to heavily rely on sourcing it from overseas. This is due to a tightening of lending standards and an increase in money being deposited with the banks.
How about looking forward?
ASB expects the OCR to remain unchanged until August 2019. Because the OCR is the main influencer of short-term fixed and floating mortgage rates, they expect them to remain fairly stable in the meantime. That means, if you have a short-term fixed rate mortgage due to expire in the next 15 months, you are likely to be able to re-fix it for another short term at a similar rate.
Over the longer term, however, ASB’s economists expect interest rates to gradually rise as the OCR creeps back up and long-term global interest rates do the same. This is likely to affect the interest rates available on mortgages with fixed terms of more than two years.
It’s worth keeping in mind, however, that unexpected events can cause interest rates to rise much more quickly than anticipated. In February, following several days of wild stock market fluctuations in the United States, the Reserve Bank warned that market volatility could result in sudden interest rate rises. For example, if the global economy recovers faster than expected, it could drive inflation up, which in turn may have a rapid upward effect on interest rates. While that might not affect you immediately, it can make a big difference to your monthly budget once your low fixed rate expires!
It’s that kind of uncertainty that can make it difficult to decide what to do with your mortgage when it’s time to re-fix your interest rate. At SurePlan, we’ve got our finger on the pulse, and we take a holistic view of all your finances and factor in current interest rate trends and future predictions to help you make the right choices. Careful planning that includes your personal financial goals, insurance, wills and mortgages helps to put you in the best possible position to deal with the ever-changing financial landscape.
