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Well, it was no real surprise that the Reserve Bank put the Official Cash Rate (OCR) up another 0.25 basis points from 5.25 to 5.5 percent on 24th May. The Reserve Bank has signalled its intention to hold the OCR at this level for another 12 months, but we’re not so sure that will be the case. We would certainly be surprised if they raise the OCR even further. No, what we’re anticipating is for rates to start coming down again before that 12-month period is up. In fact, we still believe that we are likely to start seeing rates falling towards the end of 2023. In any case, our advice to anyone refixing or drawing down a new mortgage is to fix for one year and no more – if possible – because if you take a longer term and your circumstances change, meaning you need to break the term of your loan, you could be in for a high breakage cost.
In other news, we are seeing increased levels of activity from property investors who are taking advantage of a lower competition and reasonable property prices to buy their first rental. If you’ve got equity in your family home and stable employment, now could be a great time to look at purchasing a rental, while property prices are still very realistic and the market subdued. These things could change once interest rates start heading in the other direction (down!) and the market picks up momentum again.
It could also be an opportune time to renovate your own property. With lending at low levels, the banks are offering some good deals and some are even offering a 1 percent renovation loan (especially if your renovation has something to do with energy-efficiency, such as installing solar panels).
Don’t forget, 1 percent loans are also currently available through some banks for the purchase of electric or hybrid vehicles. You can’t get better than that!
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