Interest Rate Outlook for March

The Official Cash Rate (OCR) has been increased by the Reserve Bank by 0.25% pa from a record low (the lowest it's effect been).

But the sky is not falling like some chicken little’s in the media would have you believe.
Reason 1: Back in 2011, the OCR was reduced by 0.50% pa to provide economic stimulus after the earthquakes in Christchurch. The Reserve Bank has recently noted they want to remove that stimulus, so we’ve done alright really.

Reason 2: The OCR only affects the floating home loan interest rate and the short term fixed rates (think 6 and 12 months). The longer fixed rates are funded in an entirely different way so won’t be impacted by the news today.

On another note, the Kiwi Dollar is flying higher than ever while the Global economy seems to be continuing to floundering a little. This is evidenced by the Chinese Government’s announcement to spend the equivalent of $170 Billion NZD on redeveloping the shanty towns as the Government promotes urbanisation as an engine of growth.

There have also been several articles recently about the new Sum Insured House Insurance policies. We can’t reiterate enough that the onus is now on you, rather than the insurer, to ensure the sum insured is appropriate to cover the worst case situation that could occur.

We always design loan structures to everyone personal tastes and cash flow, but a good bet currently would be a 3 year fixed rate in the low 6’s. Almost as low as the current floating rate, but protected against any future OCR increases.


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