Total Mortgages Look At How the Latest OCR Could Affect Your Mortgage

New Zealand's benchmark interest rate could stay at a record low until 2020, but borrowers could still face rising mortgage rates driven by global protectionism.

In its review statement of 2017, the Reserve Bank left the official cash rate (OCR) at 1.75 per cent, and indicated that it could sit unchanged for at least three years.

The Reserve Bank said that despite an economy which was performing strongly, it was likely that it would take time for inflation to return to a level which would make increasing the OCR necessary.

Estimating that mortgages had increased by around 50 basis points from recent lows, the future for borrowers would be dictated by global events, especially those in the United States, with the long term outlook for mortgage rates very much depending on what happens to long term interest rates and that will very much depend on what happens globally, put particularly in the US, and where the US goes with fiscal policy. Since Donald Trump became president of the United States, financial markets have begun forecasting "Trumpflation" - inflation sparked by debt-fuelled spending and the introduction of tariffs.

The Reserve Bank uses monetary policy to maintain price stability as defined in the Policy Targets Agreement (PTA). The current PTA requires the Bank to keep inflation between 1 and 3 percent on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint. The Bank implements monetary policy by setting the Official Cash Rate (OCR), which is reviewed eight times a year.

By affecting overnight rates, the Reserve Bank has a strong influence on short-term interest rates such as the 90 day bill rate and floating mortgage rates. As the OCR affects short term interest rates, if a majority of mortgages are on long term fixed rates, then the OCR will have little effect on mortgage rates.

When choosing your home loan, it’s vital that you weigh up your options, and Total Mortgages can take the hassle out of obtaining your home loan, and guide you with their knowledge to make the process simple, easy, and most importantly make sure you have the best deal available that suits your circumstances. They have a panel of over 16 lenders, including the major banks and non-banking lenders, which they can send your application too.

For more information on NZ mortgage rates, Hamilton mortgage brokers and a mortgage repayment calculator, please go to http://www.totalmortgages.co.nz .