Find out the new official rate here
The Reserve Bank of New Zealand has lifted the official cash rate by 0.5 basis points to 3.5%, with lender interest rates expected to rise in due course.
Wednesday’s increase is the eighth OCR rise in the last 12 months. The RBNZ board begun lifting the cash rate in October 2021 from 0.25% and has continued increasing it at each board meeting for the past year.
The RBNZ is expected to lift the OCR next month when it meets for the final time in 2022.
The board said demand in the New Zealand economy remained resilient to global and domestic headwinds over the first half of 2022.
“Household spending is holding up, despite low consumer confidence and high inflation. Overall, household budgets have been bolstered by high levels of employment, savings built up during COVID-19 lockdowns and government support payments.
The board said a significant increase in international visitor arrivals following the reopening of our border has likely boosted demand in the tourism and hospitality sectors.”
“The Committee members agreed that monetary conditions needed to continue to tighten until they were confident there was sufficient restraint on spending to bring inflation back within its 1% -3% per annum target range and the Committee remains resolute in achieving the Monetary Policy Remit.”
Responding to the RBNZ’s latest move, Auckland brokerage Catalyst Financial managing director Peter Norris (pictured above) said he predicts the floating rate to jump in line with today’s cash rate shift.
“We have seen fixed rate increases across the board from one year to five years because of today’s rise. Today’s increase to interest rates means there will be less people able and less people keen to borrow money,” Norris said.
“Another rate rise also tends to mean that banks will lift test rates which means borrowing ability goes down, making it harder and more expensive for people to lend money.”
Norris said today’s outcome would have a negative impact on the mortgage and finance industry.
“I believe our property market will take a hit and property prices will fall further, along with negatively affecting LVR restrictions and debt to income ratios,” he said.
“Our industry has welcomed the CCCFA changes which have eased in the last few months, but borrowing capabilities are now really struggling, so another interest rate increase means borrowing will take a hit.”
Norris said he had been advising his clients to fix their loan rather than rely on the floating interest rate.
“Personally, I would be fixing my home loan longer term rather than over the last few years where people were chasing that one-year fixed rate because rates were going down,” he said.
“As an adviser, I was previously encouraging my clients to look at the short-term option rather than going longer, however my advice is different now. I am encouraging my clients to fix longer term - say two or three years and splitting their loan by hedging their bets across different fixed options to mitigate the risk against rate fluctuation.”
