Mobile Mortgages

Summary – No change likely for some time

• The Reserve Bank of New Zealand (RBNZ) left the Official Cash Rate (OCR) unchanged at 2.5%.
• The RBNZ also noted that there are signs of modest growth in the New Zealand economy but the global economy remains very fragile.
• The OCR looks set to remain at its current level for an extended period.

What happened?

• As widely expected, the Reserve Bank left the OCR unchanged at 2.5% at its latest review on 26 January 2012. 
• The RBNZ also said there were signs of modest growth in domestic spending and a limited recovery in the housing market. Rebuilding in Christchurch looks set to provide a significant boost, though continued aftershocks could delay this.
• However they also noted that while international financial market sentiment had improved slightly, the global economic outlook continues to be fragile.
• The Reserve Bank said this uncertainty, and the fact that inflation pressures have reduced, made it prudent to keep the OCR at its current level.

What does this mean?

• The tone of the Reserve Bank’s announcement indicates it is in no hurry to raise the OCR. Our economists expect that any increase is unlikely to occur until December at the earliest.

How does the OCR affect home loan interest rates?

The OCR is set every six weeks by the Governor of the Reserve Bank.  The Governor sets this rate to manage inflation, based on what’s happening in the economy.  The OCR is one of many indicators, including overseas interest rates and wider economic developments, that affect short term interest rates such as floating rates and one and two year fixed lending rates.