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Turns out ANZ was wrong.

The OCR is staying steady at 5.5%. They thought the OCR would go up. But from what the Reserve Bank said … that won’t happen.

All the doom and gloom articles from the last few weeks now look like a storm in a teacup.

But although there was no change to the OCR, there were some surprising changes to the forecasts. Let’s dig in.

Today vs 1-year forecast – Where are things headed?

Things are moving in the right direction for property investors.

Don’t get me wrong, inflation is still too high, and interest rates are expensive. On top of that, property prices went down over the last 12 months.

But, zoom forward a year, and the Reserve Bank thinks inflation will be back within their target band (1-3%).

ANZ thinks the 1-year rate will be under 6%, and our central bank says house prices will have increased.

Things are getting better for investors.

What’s happening with inflation?

Inflation is still too high – 4.7%.

But, the Reserve Bank's efforts are working. They think inflation will fall to 3.8% the next time the data comes out in mid-April.

By this time next year, the Reserve Bank thinks inflation will be back in the box, hitting 2.5%. Almost where it needs to be. In fact, they think they’ll be within target band by September this year.

That’s one reason they’ve (ever so slightly) lowered their OCR forecasts. They predict rates will come down a little bit faster than they previously thought.

The chance of another hike also went down.

Back in November, the Reserve Bank’s forecast suggested there was a 75% chance of one more hike.

Their latest forecasts imply that chance has gone down to 40%. So, there is a better-than-even chance that the next move in the OCR will be downwards.

Does this mean mortgage interest rates will come down?

Interest rates have gone down (a smidge) since late last year.

They may not be massive falls … but they are falling.

The 2-year saw the biggest decrease. It went from 6.99% to 6.75%. That saves $23 a week on a $500,000 interest-only mortgage.

ANZ thinks the 1-year rate will be down to 5.7% by this time next year. However, bear in mind that their recent predictions haven’t been very accurate 😅.

Some mortgage brokers suspected that the Reserve Bank was lurking in the shadows. They think, "Maybe the Reserve Bank is telling banks not to lower their interest rates."

Reserve Bank Governor Adrian Orr put that theory to bed.

When asked whether he was comfortable with banks lowering their rates, he said:

“Yes. It’s a competitive environment … I really do hope it’s competitive out there because I imagine it’s a low-volume market as well. We should be seeing pricing pressures. We should be seeing margins tightening up. We should be seeing the banks working hard to win against one another.”

How much will house prices go up?

What happens to house prices if inflation and interest rates head in the right direction?

The Reserve Bank revised down its forecast. Instead of house prices increasing 5.2% in the 12 months to December; they now think house prices will be up 3.4%

They then expect house prices to ramp up over the next 3 years. Their latest forecast suggests that house prices could rise 16% by early 2027.

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Andrew Nicol

Managing Director, 20+ Years' Experience Investing In Property, Author & Host

Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.

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