Jenee Tibshraeny: NZ Herald Wellington business editor on the mood among mortgage holders following the OCR update

The light at the end of the tunnel could be in sight for mortgage holders after today's OCR update.

The Reserve Bank left rates unchanged at 5.5 percent - but the bank has hinted cuts could be coming sooner than initially predicted. 

NZ Herald Wellington business editor Jenee Tibshraeny explains how the Reserve Bank's change in tone could impact borrowers. 

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Episode Transcript

Speaker 1 (00:00):
As we've discussed, the Reserve Bank isn't saying very much
and when we're finally going to see the interest rates fall,
but mortgage holders are betting they're going to fall this year.
Jane Tibshradi is The Herald's Wellington Business editor and with
us agana Hey Heather, so what are you seeing that
indicates their betting on this year?

Speaker 2 (00:14):
So the Reserve Bank releases quite a bit of interesting data.
One of the data sets that released recently shows that
about seventeen percent of the new mortgages that banks wrote
in May went to people who fixed for six months.
So that was quite an increase from what we've seen previously.

(00:36):
So basically, proportionally proportionately, a lot more of the new
mortgage lending was going to people fixing for relatively short periods,
so that seventeen percent for owner occupiers. For investors it
was even higher at twenty two percent, quite a big
jump from where it had been. Now. I should say

(00:57):
that fixing for a year is still by far the
more popular option, and it has been for some time,
but I think it is interesting that in May, you know,
fairly significant number of people thought to fix for six
months and that was despite the Reserve Bank at that
time suggesting that it would only cut the OCR in
around August next year.

Speaker 1 (01:19):
Now today, I probably have not actually underscored this enough
on the show this evening, but what has just happened
from the Reserve Bank is a massive change in tone. Right.
They have gone from being like really hawkish to really
dubvish in the space of two announcements, haven't they.

Speaker 2 (01:35):
Yeah. Look, I thought it was a significant pivot from
as you say, surprisingly hawkish to surprisingly dubvish in quite
a short space of time. Interestingly, without any new inflation
figures in that period that the Reserve Bank has changed
its view. So the Reserve Bank currently only has inflation
figures for the March quarter as it did back in May.

(01:58):
I thought that the change was notable. It was a pivot.
Sharon Zolna from A and Z, who I talked to previously, thought, yeah,
it's a change of tone, but it's not too drastic. Look,
I think the new inflation figures for the June quarter,
which are out next week, will be the ones to watch. Yeah, right,

(02:19):
like if that, if they if they come in showing
the inflation is actually falling quite a bit. You know,
I think we could see see rate cuts soon. I
think the Reserve Bank previously suggesting that the first cut
would be in August next year is now, you know,
totally an outdated view.

Speaker 1 (02:36):
Is it possible that somebody like Sharon Zolner says it's
not a massive pivot because nobody believed them when they
were being that hawkish anyway.

Speaker 2 (02:44):
Yeah, look, that is interesting markets in particular, it didn't
believe the Reserve Bank at all. Economists were a little
bit more balanced, and you know, now today's statement really
has given markets the evidence they were looking for to
price in rate cuts soon. My understanding is that the

(03:05):
pricing is such that markets, you know, there is a
chance that you know, some people think there's a chance
that the first cut could even come in August, but
most economists are now still picking November. I think if
you take a step back, this is all pretty confusing
for your average person trying to figure out how to
fix their mortgage or what to do with their term deposits,

(03:27):
because we've had, you know, quite a few different views
come out within the past few weeks. But what I
would say is interest rate cuts now seem like they
could happen sooner than we thought two months ago, and
the chance of a hike is probably now no longer there.

Speaker 1 (03:45):
Yeah, hey, Jena, thank you very much. Really appreciate you
talking us through that genetive training. Harold's Wellington Business Editor.
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