Between the US elections, and New Zealand’s final OCR announcement of the year, there’s a lot on the cards in November. So what does it all mean for interest rates, the housing market, and the wider economy?
Last week, the global spotlight was on US politics
Despite the polls suggesting it would be a tight race, Trump’s victory over Kamala Harris has proven to be a decisive one.
The Republican Party has gained control of the Senate and is poised to maintain control of the House, which means he’s going to be a pretty powerful president—and the implications of that (for the US, and the rest of the world) could be significant.
Potential risks for New Zealand include the direct impact of new trade tariffs affecting our exports or a ripple effect from economic downturns in key trading partners like China.
On NZ shores, we’ve got our last Official Cash Rate (OCR) announcement of the year happening on November 27th
It’s widely expected the verdict will be a 0.50% cut—taking the OCR down to 4.25%.
The best advertised one-year fixed mortgage rate on offer at the moment is 5.79%, although lenders have been open to negotiation on that, with some going as low as 5.59%.
If things play out as predicted on 27th November, advertised rates should fall to slightly below where those negotiated rates are sitting, and settle somewhere between 5.29% and 5.49%.
This OCR announcement will also see the Reserve Bank deliver its updated interest rate forecast. If that points to a series of aggressive cuts over the first half of 2025—designed to get us back to a neutral OCR around mid-next year—longer-term wholesale rates should fall relatively quickly.
That, coupled with signs of life returning to the housing market, should help to drive more competition among lenders, and potentially see three-year fixed rates fall below 5.00% (possibly as low as 4.89%) by the end of the year.
What’s happening with the housing market?
Buyer activity has certainly picked up since October’s OCR cut, but for vendors it’s still a mixed bag.
High-income buyers are driving demand for well-maintained properties in desirable locations, but there are still pockets of weakness where sellers are having to lower their price expectations to meet the market.
While the foundations are there for a slow and steady recovery over the next few years, there will be a few bumps along the way.
And what about the wider economy?
Things are feeling a bit more positive now that interest rates are on the way down again, but the fact is it’s going to take a while to undo the damage of the last few years.
Even as people’s disposable income improves, most are going to be focused on paying down debt, and growing their savings again, before they start thinking about making any big financial commitments. And with unemployment tracking upwards, people are feeling less secure in their jobs as well.
So, it’s likely to be pretty tough going for businesses in the near-term, although hospitality and tourism might get a bit of relief as we move into the summer holidays. Any real recovery in business confidence is unlikely until unemployment peaks, likely around mid-next year.
Then, of course, the layer of global uncertainty is also going to play a role in shaping what comes next.
While there’s light on the horizon, it’s going to be a slow and steady recovery ahead.
Check in again next week for our latest update on what's been happening with New Zealand interest rates.
