OCR to 8%

The Reserve Bank of New Zealand today dropped the OCR from 8.25% to 8%.

No-one is really expecting this to effect mortgage rates in the short term however DR. Bollar dfid indicate that further cuts may be sooner rather than later.

A lot will depend on the NZ Dollar movement, if it slips too far then this may negate further cuts. Time will tell.

Most of the central banks around the world have the same problem, inflation heading upwards and high interest rates. It will be interesting to see how the NZ strategy works.

Home values are still slipping and fuel prices remain high but we appear to have topped the peak on West Texas Crude but the $20 a barrel drop has not really een reflected fully at the petrol pumps. Most economists expect fuel prices to drop even further as speculation on oil appears to be waining.

Still not a good time to buy your residential investment property, the freezing or payouts from the Hanover group (One of larger finance companies in New Zealand)reflects the problem in the investment market as many developers find it harder and harder to attract buyers in what was traditionally the primary markets like Queenstown.

Home owners are not looking to sell at this time but are taking the rental market option, this is putting extra strain on the current landlords as more and more vacant property hits the market. This will result in lower rentals.
We still believe that you should avoid investment property sales consultants at this time and do your own thing, this will save you many thousands of dollars which can be spent on property improvements that will attract tenants who are an increasing property portfolio to select from.

Summary: - Current market in New Zealand is still recessive.
1. Falling house prices.
2. Finance companies still struggle to find investment capital.
3. Developers struggle to find buyers.
4. High mortgage interest rates.
5. High fuel prices.
6. Inflation trending towards 5%+
7. Labour market gathering momentum for wage increases to cover rising costs.

Home owners should look to refinance with financially efficient mortgages (FEM's) and ensure they take every benefit to reduce the debt costs.

Latest opinions appear to be saying that we can expect another 12 months of this but that is still crystal ball gazing and in reality we do not believe anyone knows what will happen next.

Remember we still have good quality water, a great environment and summer is not that far off. Our lakes are filling nicely with water so power cuts seem remote. All in all NZ is a great place to live and I think the reserve bank will do its best as usual.

The above represents the opinion of IMS Financial Services, information and views are based on general news and bank issued newsletters from their various economists. We are mortgage brokers and not economists and you should not rely on our opinions when making financial decisions. Always seek expert advice unless of course you want to talk about mortgages and we can do that.