Mortgages

OCR reaction: Reserve Bank open to lower, negative rates

Economists say that the Reserve Bank has left the door open to lower or even negative rates, as it kept the official cash rate on hold in its Monetary Policy Statement (MPS) today.

Wednesday, May 13th 2020

Jarrod Kerr

The OCR will stay at 0.25% after the central bank outlined its latest Monetary Policy Statement.

The Reserve Bank said it was in ongoing "discussions" with trading banks about preparations for negative interest rates, and signalled lower rates could be on the way early next year.

Kiwibank chief economist Jarrod Kerr said the central bank "has left the door open to negative rates should they need it", but said the main message was the expansion of New Zealand's quantitative easing programme, which was increased to $60 billion.

Kerr said the Reserve Bank could cut the OCR again if the economy deteriorates further.

"If things don't pan out as we hope, or if we see another lockdown, or activity being subdued for much longer, they will go down that path."

Westpac chief economist Dominick Stephens said the Reserve Bank's decision to keep the OCR on hold was "exactly what we expected".

"They are open to a negative OCR but can't implement it now," Stephens said. "They gave forward guidance that they don't expect to change the OCR until early next year, but it wasn't an iron-clad promise."

NZIER's Christina Leung said the Reserve Bank has signalled its willingness to use unconventional policy to boost the economy.

"The central bank has now flagged that possibility [of negative rates], as well as introducing other unconventional monetary policy support measures," she said.

In the short term, the Reserve Bank expects mortgage rates to fall in line with wholesale costs.

"We expect to see retail interest rates decline further as lower wholesale borrowing costs are passed through to retail customers," the central bank said in its statement.

CoreLogic welcomed the Reserve Bank's comments, and suggested lower mortgage rates could be on the way.

"We’ve already seen some mortgage rate offers go below 3% and there are plenty of anecdotes about investors keen to continue buying property as they hunt for a better yield than money in the bank.

"More falls in mortgage rates can’t be ruled out either, given that the RBNZ today also signalled the possibility of further cuts to the OCR next year, and subtly suggested that the trading banks should be passing on any falls in financing costs to borrowers."

 

Comments

No comments yet

Most Read

SBS FirstHome Combo 4.29
Unity First Home Buyer special 4.29
Co-operative Bank - First Home Special 4.85
China Construction Bank 4.85
ICBC 4.85
TSB Special 4.89
Kiwibank Special 4.89
ASB Bank 4.89
Westpac Special 4.89
BNZ - Std 4.89
AIA - Go Home Loans 4.89
Nelson Building Society 4.93
ICBC 4.95
SBS Bank Special 4.95
China Construction Bank 4.95
Wairarapa Building Society 4.95
TSB Special 4.95
ANZ Special 4.95
ASB Bank 4.95
Kainga Ora 4.95
Westpac Special 4.95
AIA - Go Home Loans 4.95
SBS Bank Special 5.39
Westpac Special 5.39
ICBC 5.39
Co-operative Bank - Owner Occ 5.59
BNZ - Std 5.59
BNZ - Classic 5.59
AIA - Go Home Loans 5.59
ASB Bank 5.59
Kainga Ora 5.69
Kiwibank Special 5.79
ANZ 5.79
SBS Construction lending for FHB 3.94
AIA - Back My Build 4.44
CFML 321 Loans 4.99
Co-operative Bank - Owner Occ 5.95
Co-operative Bank - Standard 5.95
Heartland Bank - Online 5.99
Pepper Money Prime 6.29
Kiwibank - Offset 6.35
Kiwibank 6.35
TSB Special 6.39
ASB Bank 6.44

More Stories

Four decades of 6-7% yearly house price growth ending

Friday, March 21st 2025

Four decades of 6-7% yearly house price growth ending

New Zealander’s reliance on property capital gains in the mid-single digits is at an end.

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

Friday, January 31st 2025

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

It’s been years in the making and former real estate agent Mike Harvey is now coming to market with his platform matching buyers and sellers, an offering he says will be a gamechanger for the industry.

Leaving last year's stumbling housing market behind

Friday, January 17th 2025

Leaving last year's stumbling housing market behind

As interest rates ease and job losses climb, New Zealand’s housing market faces a mixed year of modest growth, with conflicting forces shaping the outlook for homebuyers and investors.

Don’t bet on house prices rising faster than incomes

Wednesday, January 15th 2025

Don’t bet on house prices rising faster than incomes

Former Reserve Bank Governor and National Party leader Don Brash says there are grounds for believing that house prices may finally have ended the three-decade period when they rose significantly faster than incomes.