NZ Market Update February 2018

The Reserve Bank of New Zealand (RBNZ) announced an unchanged cash rate this month of 1.75%. This is not surprising given the uncertainties that remain in the New Zealand market. With the recent changes in government leadership and a new governor on the cards for the Reserve Bank of New Zealand (RBNZ), many economists are calling for caution with regard to the future.

We may see some small changes in monetary policy in March as Adrian Orr takes on his role as the new Governor of the RBNZ. Mr Orr is set to review a new policy targets agreement as well as the monetary policy. Recent statements from the RBNZ indicate that policy may adjust slightly to accommodate the uncertain markets.

“Global economic growth continues to improve. While global inflation remains subdued, there are some signs of emerging pressures.

Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly,” said Reserve Bank Governor, Grant Spencer in a February press release.

Calls continue for the Loan to Value Ratio (LVR) threshold to be lowered further and first home buyers made exempt from high deposit lending restrictions based on their savings history. Only time will tell whether this will become a reality, but I suspect this is not on the cards in the near future given recent LVR threshold changes.

Looking to rates, the majority of economists predict the cash rate will remain on hold until at least 2019 due to the subdued housing market and slowing GDP growth affecting the economy. Right now, given the low rates available, it’s important for your clients to talk to an adviser and reassess their home loan to see if they can save some money. These rates also make it easier for first home buyers to enter the market and with the HomeStart grant available and the potential to access their KiwiSaver to build a deposit, there are lots of options out there.

If your clients have any questions about eligibility or taking advantage of the low-interest rates on offer, please don’t hesitate to contact me.