Interest rates likely to fall in February, economist says, creating more opportunities for advisers

Advisers are benefiting from increased opportunities

Interest rates likely to fall in February, economist says, creating more opportunities for advisers

As New Zealanders gear up for the Reserve Bank of New Zealand's next meeting, economists begin to weigh in. And the optimism that they're creating could be good news for advisers. 

While the nation's official cash rate is currently low at 4.25% — the lowest it's been since November 2022 — many in the Kiwi State are hopeful for further cuts to the OCR at the Reserve Bank's Feb. 19 meeting. 

On Friday, Westpac NZ chief economist Kelly Eckhold predicted that the RBNZ will likely cut rates by 50 basis points during the meeting, driven largely by the country's near zero economic growth in 2024's fourth quarter. 

"They will have half an eye on the fall in the exchange rate that's occurred over the holiday period, because the [trade weight index] is now tracking about 3% lower than the liberals that they assumed would have been the case than when they did their forecast in November," he said. "However, I don't think it's going to matter much for what they do in February. I think the Fed's standards are going to matter a lot more for what happens later on in the year."

Tony Alexander, an independent economist and former economist with the Bank of New Zealand, also expects the RBN to cut rates in February, but only by 25 basis points, or 0.25%. He said his decision was also influenced by the strong US economy. 

Either way, the statements have created a renewed sense of confidence in the market. While borrowers rejoice over the potential for lower interest rates, advisers are benefiting from increased opportunities. 

Alexander McAlpine (pictured above), an Auckland-based mortgage adviser at Vega Mortgages, said he's received an increased number of inquiries in recent weeks, as the belief that a rate cut will happen continues to gain traction. 

"A lot of clients are expecting the rates to drop. So they're looking for preapprovals, they're looking at refinancing" McAlpine said. "A lot of people who may have been holding off before are now looking [to buy]. There's more confidence in the market. The expectations for an OCR cut makes the rates look better. So they're asking questions, seeing how much they can borrow, seeing how much they can get pre-approved for."