Adviser tells clients to spread financial risk
After the Reserve Bank of New Zealand announced it was lifting the official cash rate to 1.50%, a financial adviser has shared her thoughts on what homeowners should do next.
Insurance & Lending Group financial adviser Rachael Thompson (pictured) said she was telling her clients she could not determine if banks would pass on interest rate rises off the back of Wednesday’s announcement.
“Every OCR announcement is a wait and see,” Thompson said. “Banks do not always respond to interest rate rises/falls after each announcement and the reality is, banks have been doing this consistently over the last eight months.”
In releasing its decision, the Reserve Bank said the level of global economic activity continued to generate more pressure on inflation which had now reached 3%. This was exacerbated by ongoing supply disruptions, particularly driven by COVID and the war in Ukraine.
Read more: RBNZ makes massive rate announcement
Thompson said people who were dependent on OCR changes and interest rate increases might be at risk, especially those who purchased property now for short-term gain.
“We know house prices are currently falling off the back of a few years of massive growth,” she said.
“From an adviser perspective, I tell my clients to spread their risk and limit their exposure of interest rates by having fixed end dates as peace of mind and flexibility.”
Thompson said the New Zealand housing market had trended upwards, and it was beneficial if you could buy and hold property.
“Prices have gone up despite peaks and dips. It is a long-term financial investment,” Thompson said.
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Thompson said chief economists were saying people would be borrowing at higher rates for the next one or two years due to external pressures.
She was encouraging advisers to remain informed and be relevant to clients in a challenging market.
“It is about having the right marketing and talking to people who can get approval now. If a client can get approval now, then it is a great time to try and buy because who knows what it will be like in one month or six months’ time from now,” Thompson said.
Advisers offering quality advice was paramount for the industry, she said.
“Some people are still hesitant to visit an adviser because they are unsure of the value, time, and money we can provide,” she noted.
