OCR Rises

The Reserve Bank (RBNZ) yesterday announced an increase of 25 basis points to the official cash rate (OCR), taking it to 3 per cent.

Soft consumer spending and a lower-than-expected inflation outlook have many suggesting that the RBNZ will move the OCR to between 3 and 4 per cent by Christmas and then pause to determine the effect on interest rates and the economy.

RBNZ Governor, Alan Bollard, commented that at this time it was still appropriate to continue removing the extraordinary stimulus setting, but the pace of further interest rate increases is likely to be slower than originally predicted.

It would seem likely also, given the RBNZ’s current stance, that the OCR peak in this cycle may be marginally lower than forecast.

Borrowers should continue to monitor developments and update their mortgage strategy in line with any changes to the market. A regular home loan health check can assist you with this.