OCR: predictions for 2020

Corporate male holding pen, pointing with pen to graph on table

As we draw closer to the end of 2019, we’re hearing a change in tune from experts about what’s in store for the OCR in 2020.

The latest ANZ monthly survey indicated that while business confidence may be on the way up, the overall mood is still relatively low and GDP growth will remain the same in 2020.

However, economists and banks now believe that it may not be as necessary for the RBNZ to be as hands-on in 2020 as they had first predicted.

Only a couple of months ago, a further rate cut of 0.5% was predicted to happen by the end of 2020, on what is already a historically low one percent official cash rate. Now it is expected that a 0.25% cut in May will be all that happens next year.

This drop is still seen as a necessary step, in continuing the upward trend for business confidence. It will boost business profit margins and help to counteract an increase in interest rates due to the capital proposal from the RBNZ.

We’re expecting an increase of around 0.5% to mortgage rates, with some banks already on their way to increasing their advertised rates this side of Christmas.

Most banks have lifted their two-year rate by 0.1%, and experts are predicting a further increase early next year.

If the OCR is in fact cut in May, mortgage rates could still remain under four percent which will be great news for those looking to purchase or refinance during the holiday season. As always, watch this space.

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