The Reserve Bank has left the official Cash Rate unchanged today at 1.75%.
In a statement released by the Reserve Bank this morning, Governor Graeme Wheeler said, “Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.
“House price inflation has moderated, and in part reflects loan-to-value ratio restrictions and tighter lending conditions. It is uncertain whether this moderation will be sustained given the continued imbalance between supply and demand.
“Headline inflation has returned to the target band as past declines in oil prices dropped out of the annual calculation. Headline CPI will be variable over the next 12 months due to one-off effects from recent food and import price movements, but is expected to return to the midpoint of the target band over the medium term. Longer-term inflation expectations remain well-anchored at around 2 percent.”Canstar general manager, Jose George said this morning that the Reserve Bank’s announcement to hold the cash rate was in line with market expectations.
“After a flurry of increases in mortgage rates over the last quarter, recent weeks have seen a slowdown on this front. However, with lenders remaining reliant on overseas capital to fund their domestic mortgage book further rate increases cannot be ruled out,” said George.
He said those with home loans should ensure that they can accommodate any potential increased cost in continuing to service their loan. “Depending on individual circumstances, now may be a good time to negotiate a longer term fixed rate option. Currently, there are at least 10 home loans below 5% p.a. in the 2 and 3 year fixed rate category, according to Canstar’s database.
“For people looking to get on to the property market either as first home buyers or as investors, the early signs of a slowdown in the Auckland market is encouraging but not replicated in other regions where we are still seeing year-on-year price increases. This, together with the costlier home loan environment compared to 12 months ago, still makes it a difficult market to crack for many consumers.”