Latest / Best of Business / Jenee Tibshraeny: NZ Herald Wellington business editor on how the OCR announcement will impact mortgages

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Jenee Tibshraeny: NZ Herald Wellington business editor on how the OCR announcement will impact mortgages · Best of Business

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  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
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  Speaker 2: And Janae Tibshirani, the Herald's Wellington Business Editors with us. Hello, Janae. Hi, Heather.
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  Speaker 1: Okay, let's talk about this OCR decision today, which came
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  Speaker 1: as something of a surprise. What do you reckon will
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  Speaker 1: be the impact on rates, both term deposits and mortgages?
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  Speaker 2: Well, the experts I've spoken to have suggested that because
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  Speaker 2: the statement was more dovish than expected, you know, everyone
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  Speaker 2: expected the Reserve Bank to hike the OCR, not keep
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  Speaker 2: it on hold. So because of that shock, they reckon
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  Speaker 2: mortgage rates and term deposit rates are firmly staying where
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  Speaker 2: they are. And in fact, there might even be some
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  Speaker 2: downward pressure on those rates. So that's kind of the
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  Speaker 2: high level, but if we dig into the detail a
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  Speaker 2: bit more, the OCR affects shorter-term rates more directly. So
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  Speaker 2: in particular, you know, rates that are less than two
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  Speaker 2: years for mortgages, for example, same with term deposits. So
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  Speaker 2: those are the rates they reckon are definitely not rising
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  Speaker 2: any time soon. And The thing is that the compounding
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  Speaker 2: factors here, so you have what the Reserve Bank does,
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  Speaker 2: but then banks are also operating in the market, and
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  Speaker 2: the way that market operates affects the way they price
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  Speaker 2: these things. So at the moment, there's subdued demand for mortgages.
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  Speaker 2: People are not rushing out to buy houses, so that's
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  Speaker 2: making it hard for banks to lift mortgage rates. People
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  Speaker 2: are also scared due to the economic conditions. So they're
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  Speaker 2: putting their money in the bank, they're saving, even if
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  Speaker 2: deposit rates are not that attractive. So you have that
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  Speaker 2: factor in the market. People are already saving, they're not
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  Speaker 2: wanting a whole lot of mortgages, and now you have
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  Speaker 2: the Reserve Bank not lifting interest rates. Yeah.
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  Speaker 1: The longer-term interest rates are more affected by what's happening
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  Speaker 1: on the wholesale market globally, eh? What are you seeing
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  Speaker 1: happen there?
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  Speaker 2: Yeah, so that's right. Basically, in the US and in Europe,
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  Speaker 2: governments are taking out a lot of debt and this
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  Speaker 2: is concerning investors, the people buying the debt, because they're thinking,
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  Speaker 2: oh man, how on earth are these governments going to
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  Speaker 2: pay all this back? So that's putting bond yields up,
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  Speaker 2: and that has an impact on interest rates. Of course,
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  Speaker 2: there's also concern around inflation due to oil prices remaining high.
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  Speaker 2: So those factors are kind of putting upward pressure on
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  Speaker 2: interest rates, but interest rates that are longer term. So
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  Speaker 2: the OCR affects the shorter term rates, Longer term, there
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  Speaker 2: is actually upward pressure on rates.
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  Speaker 1: Okay, so what happened to the dollar?
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  Speaker 2: We were just talking to Milford Asset Management about this today.
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  Speaker 1: This didn't support it very much, did it?
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  Speaker 2: Yeah, exactly. So the dollar's tumbled. It was already really weak.
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  Speaker 2: This is good news for exporters. Exporters have really been
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  Speaker 2: kind of propping up the New Zealand economy recently, and
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  Speaker 2: the Reserve Bank noted that while it was good for
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  Speaker 2: them and their employees, the benefits hadn't really spread across
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  Speaker 2: the economy. But anyway, weak dollar, good for exporters, bad
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  Speaker 2: for importers, people who are buying stuff from overseas, and
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  Speaker 2: if I want to buy a fridge or something like that,
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  Speaker 2: The weak New Zealand dollar makes that more expensive. So
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  Speaker 2: when the dollar is weak, it does mean that you
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  Speaker 2: could import a bit of inflation. That's not good. And
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  Speaker 2: of course, for people who want to travel overseas, have
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  Speaker 2: a nice holiday. I went to the US recently and
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  Speaker 2: it was really expensive. So the weak dollar does not help.
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  Speaker 2: But you knew that in advance, Janaye. Nobody forced you
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  Speaker 2: to go to the US. I know, I know, I know.
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  Speaker 2: No one should feel sorry for me. But I did
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  Speaker 2: panic every time I went to pay and then... I
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  Speaker 2: had to tip on top of that.
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  Speaker 1: Yeah, and that is an adjustment in and of itself,
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  Speaker 1: isn't it? Janae, thanks very much, mate. Look after yourself.
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  Speaker 1: Janae Tibshirani, the Herald's Wellington business editor. For more from
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