Let’s take a look at what’s been happening in New Zealand’s economy, and with interest rates, this week.
The last few days have brought further evidence of just how low the mood is in New Zealand right now
Consumer confidence had been tracking upwards, slowly but surely, over the last few months—but all that progress has been undone in the latest stats.
The figures for June, released at the start of this week, show consumer confidence has fallen by 11 points over the last month, taking it to near-historic lows.
It’s a clear reflection of how tough going it is out there for people right now, as increased mortgage expenses and an inflated cost of living continue to bite, forcing households to cut back in other areas.
Things aren’t looking any rosier on the business side of the equation either.
The PMI Index, which measures levels of activity inside New Zealand’s manufacturing sector, fell by 1.6 points in May—marking the 15th consecutive month of contraction for the industry.
What these two numbers tell us is that you can pretty much guarantee the economy will remain weak over the coming months. Although it seems we’ve just edged out of recession with the latest GDP numbers, released this week, there’s no doubt the going is tough out there at the moment—and it’s probably going to get worse before it gets better.
But all this poor economic data means there’s mounting pressure on the RBNZ to drop the Official Cash Rate
Currently, the RBNZ is forecasting that interest rates will stick at their current level (at least) until late 2025.
Increasingly, though, the markets are anticipating that relief will come earlier than that. Wholesale rates are pricing an OCR decrease in November, once Q3 2024 inflation data has been released (in September)—and our expectation is that it could be even earlier than that.
Six-month or one-year terms are still the recommendation for anyone needing to fix their mortgage in the coming weeks
The best six-month rate available at the moment is 6.89%, while for the one-year term, it’s 6.85%.
If you are feeling tempted by the lower rates on offer right now across some longer fixed terms (two years and up), you’ll need to be wary of the potential implications once interest rates do start to come down again.
Chances are that when rates start to fall, they’ll fall quickly. And if you want to break your fixed-term loan early to benefit from those lower rates, you’ll be subject to early repayment fees (known as break fees) which can carry a hefty price tag.
Make sure to check in again next week for another update on what’s happening with New Zealand interest rates.
