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That’s all folks – OCR increases for 2014

That’s all folks – OCR increases for 2014

"Today's announcement by the Reserve Bank should be the last of the bad news for this year.

The expected increase of 0.25% has taken the Official Cash Rate to 3.5%. Most banks are already increasing their lending and investment rates. Floating rates with the major banks look likely to re-establish at between 6.25% and 6.50%.

Most economic and financial sources believe today’s adjustment is the end of a series of hikes with the economy looking like it’s falling into line with the Governor's expectations.

Interest rates have been at their lowest for decades but now we are in an era of small and steady increases. 2015 may see some more minor adjustments.

What does this mean for the average homeowner in New Zealand? It means if you have a $200,000 mortgage against your home then the interest component may end up costing you an extra $9.62 a week. If you're at $100,000 then you're in for half that amount or in real terms just a bit more than a large coffee a week.

We could all get 'up in arms' over the increases but let's be honest, it shouldn't break the bank and it’s going to be more about careful budgeting than selling up. I believe the national economy is in good shape and we've come a long way since the GFC and the ugly years of 2008-2012. I can still recall the 1980s and interest rates of 3-4 times what they are now so I still believe home ownership is sensible and affordable. First home buyers should not be deterred – it’s likely that 90% lending ratios may be back in, on a larger scale, later in the year and that in itself will bring more positive news and will be far more influential than the recent interest rate increases."

Mike Pero
Founder of Mike Pero Mortgages and Mike Pero Real Estate

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