During the Covid-19 pandemic, interest rates plunged to record lows of 2%, while we saw the Reserve Bank lower the OCR to help alleviate some pain felt by homeowners and businesses while they struggled to service their mortgages. This certainly had a knock-on effect and we saw many people entering the market and property prices soaring in 2021.
The Reserve Bank took action to slow the rate of inflation and the OCR was reviewed and raised steadily from 1% to 4.5% in 2022.
What does this mean for homeowners in 2023? Kelvin Davidson, chief property economist for CoreLogic says the central bank’s end plan is that the OCR will be sitting around 5.5% by July, which is an increase on the current rate of 4.75%.
Economists are predicting that house prices will continue to fall this year, with Cameron Bagrie, an independent economist, thinking the bottom of the market won’t hit until investors return to the market at the end of the year. The upcoming election in 2023 will have an impact as a change in government can result in changes to policy and regulation that can ultimately impact how people spend their money.
While the OCR rate is predicted to rise, mortgage holders may not necessarily need to fear these rises as banks and mortgage lenders have factored these increases into their planning, says Kelvin. So just as mortgage holders didn’t see mortgage rates go up in the February 2023 OCR rise, they shouldn’t see them go up with the subsequent OCR rises expected until July, he says.
On an end note, we won’t know we’ve hit the bottom of the market until prices start increasing again. There are still plenty of opportunities available to purchasers and sellers in a falling market, but it’s important to align with a trusted advisor in challenging and changing times. “More than anything, New Zealanders want to know they are dealing with a real estate brand who they trust and who will do what they say they are going to do. They want to deal with sales consultants and property managers that have expertise, honesty and integrity and who are committed to achieving the best possible result for them. This is something we have been told we excel at and something we plan to continue improving on,” says Bryan Thomson, Harcourts Managing Director.