If you are a homeowner with a mortgage, the rising interest rate has been a hot topic for the past 12 months and will continue to be for the coming months. Many banks increased their rates a few weeks ago with the recent OCR announcement.

The 1-year special rate with most banks is around 6.99% p.a. with the two-year and three-year rates being slightly lower. (these rates are always subject to change on a daily basis)

Now, the question I get asked often is, should I fix it for 1 year, 2 years, or 3 years? As you know and may have heard from many economists in the media, we do not have a crystal ball to give you exactly what will happen with the rates.

Why is this you might be asking? Because there are many variables at play, the interest rates can be affected by a natural disaster(such as another flooding event), the war in Ukraine, and inflation levels in New Zealand.

These are some of the variables which need to be factored in which no one has control over, the other question I get asked a lot is why is inflation so high in the first place, what happened during Covid? What happened was record low-interest rates low as 2.19% p.a., government spending, and a tight labour market sent inflation soaring above the norm.

What are the forecasts like? Before I provide you with this forecast it is important to understand this is only a prediction, the exact numbers will almost certainly be wrong as no one can predict the perfect interest rate forecast.

Based on the 1 year rate:

Mid 2023            7%p.a.

Mid 2024            6%p.a.

Mid 2025            5.5%p.a.

Mid 2026            4.50%p.a.

To give you a picture of how the current inflation levels look compared to 2008 Global Financial Crisis and 1991 recession the graph showing on this blog produced by RBNZ will give you a better indication.

The current inflation levels are higher than the 2008 GFC Crisis, for information visit the below link as Chief Economist Paul Conway gives a speech on inflation at the KangaNews ANZ New Zealand Capital Markets Forum 2023.

https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/speeches/2023/inflation-speech.pdf

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DISCLAIMER: The information contained in this blog is general in nature. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making financial decisions, we highly recommend you seek professional advice from someone who is authorized to provide financial advice.