Official Cash Rate Unchanged at April Meeting

The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5 percent.Reserve Bank Governor Alan Bollard said: “The outlook for the New Zealand economy remains very uncertain following February’s Christchurch earthquake.”

And he followed that up with, “Given the outlook for core inflation and continued economic disruption stemming from the earthquakes, the current level of the OCR is likely to remain appropriate for some time.”

The effect is that home loan floating interest rates are likely to remain as they are for some time. And your guess is as good as ours when it comes to deciphering exactly how long “some time” is 🙂

In an historic first time ever event, Ben Bernanke the U.S Federal Reserve Chairman, provided a question and answer session overnight after his meeting. In the session he repeated earlier statements that the Fed would not be raising interest rates for an “extended period”.

On balance then, given what feels like a series of problems around the world currently, and a New Zealand economy that feels sluggish at best, we don’t see alot of reason to move from home loan floating interest rates. We reiterate our view however that if possible one should be trying to pay more than the minimum monthly repayment required on your home loan while the home loan floating interest rate is so low. Any extra repayment comes straight off the principle (the amount you owe) of the loan, leading to interest cost savings.