Will the official cash rate continue to drop?

The Reserve Bank of NZ has cut the official cash rate (OCR) by 75 basis points since June taking the OCR to 2.75%.

At the time of writing the lowest 1 year rate advertised is 4.35% and 2 years at 4.39% (these rates do not include HSBC who have additional lending criteria to the other main banks). These rates are at historically lows and there is fairly rigorous debate among the main bank economists as to how much they may fall further by.

ASB chief bank economist Nick Tuffley said recently he only gave a 25% chance of the OCR falling below 2.5% (He does expect a .25% reduction before the end of the year though). Compare that with Westpacs chief economist Dominick Stephens who thinks the OCR will reduce to 2% over the coming year.

As this debate continues its important to ensure any decisions about your own loans are based on your personal cash flows, level of certainty you require and your ability to deal with changes in the future when markets change. It is also important that you get the right advice from trusted professionals such as your accountant, lawyer or financial adviser.

The economists will be keeping an eye on future economic data such as inflation, economic growth, dairy prices and consumer and business confidence which will influence their opinions on what rates might continue to do.

If you need any to review your circumstances or need to gain approval for new lending please get in touch