November interest rate update

Wednesday, 15 November 2023

November interest rate update

While it appears (at the time of writing) that we are about to get an idea of how the new centre-right coalition to run New Zealand over the next three years will look, we are still in the dark as to how negotiations have progressed, and which policies will be shelved and what compromises will be made.

Property investors have eagerly been waiting for reversals to policies such as Labour’s rule around not allowing mortgage interest to be deducted as an expense, the shortening of Brightline and bringing back the ability to terminate tenancies without cause.

We will have to see how this plays out over the next few months and how aggressively the incoming Government will look to cut regulation further, such as the CCCFA and other unnecessary red tape.

Another point to watch will be Government decisions around fiscal policy and how this works alongside the Reserve Bank’s aggressive rates to the Official Cash Rate over the last two years to bring inflation under control.

The Reserve Bank would have been pleased to see better-than-expected inflation data a month ago also being backed up with some upward movement in the unemployment rate, and these factors are backed up by nearly unanimous agreement between economists that there will be no movement to the cash rate at the next review towards the end of this month on November the 29th which is likely to give some relief to the many in the retail and hospitality industry as well.

What is interesting is that this is where the agreement ends, with some economists believing the Reserve Bank’s job has been done as there are many signs of financial stress starting to appear alongside media articles about business failures and job losses, suggesting that the war on inflation has been won versus others who feel that inflation is more inbuilt, that with immigration showing the largest ever migration driver population gain over the last 12 months and alongside the housing market showing green shoots that at least one further hike may be required.

Even though the Reserve Bank has not increased the cash rate since their May review, we have seen local mortgage rates trending upwards on the back of increased oil prices and data coming out of the US. However, recent data has shown that the US may be getting on top of its own inflation concerns, with their most recent numbers lower than expected.

A key date to see which of the above groups of economists is correct is January 24th. This is the next update regarding local inflation and will be a major determining factor as to whether we have seen the peak or the Reserve Bank will have to tighten even further next year.

About the author: Kris Pedersen is a leading figure in mortgage advising and property investment, consistently ranked among the country's top six mortgage advisers for the past four years. With over a decade of experience, Kris is the preferred choice for investors seeking expert guidance to expand their portfolios. He shares his insights as a respected speaker at Property Investor Association groups, and his expertise extends to New Zealand and overseas property and finance markets, with regular features in NZ Property Investor Magazine. Kris Pedersen and Kris Pedersen Mortgages Limited are registered financial service providers, ensuring transparency and reliability in all financial dealings. Their credentials on the Financial Service Providers Register can be viewed here:



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