What a few days! A (in my humble opinion) much needed change of government; an all-time classic win for the All Blacks; and some great news today that the inflation monster is being tamed and rates have likely peaked. This should hopefully create goodwill around the country after what has been a pretty challenging 2023 for many people. Firstly, I won’t go too deep into politics and will focus initially from a mortgage borrowers’ point of view.

The Reserve Bank will be looking at the overall fiscal policy of the incoming government over the next few months. National’s tax cuts are potentially inflationary, but they traditionally show a lot more conservativism around how they spend and the state that the outgoing government has left the books in means we are likely to see a pretty tight rein on spending and costs.

This should play its part in constraining inflation over the next 12 months. In other news regarding interest rates, October 17 was the key date the Reserve Bank would have been keeping an eye on to decide whether to raise the official cash rate (OCR) and thus mortgage rates at their next review on November 29.

Inflation

They had been expecting inflation to be around the 6 per cent mark and with it coming in at 5.6 per cent, this was well under what almost all commentators and experts predicted. This may result in a small drop flowing through to mortgage rates in coming weeks as most banks have already baked in a higher inflation result, which may result in a drop in the cash rate earlier in 2024 than was expected.

I am seeing examples everywhere of the tight monetary policy doing the job the Reserve Bank wanted in curtailing expenditure. I read of an Auckland hospitality business owner, who has operated for 30 years, lamenting the shortage of customers; a construction boss saying many subcontractors call him daily to find work. Mortgagee sales on Trade Me have doubled in two months.

Job Losses

With roughly 30 per cent of mortgages still to come off low interest rates and move considerably higher over the next few months, there is still a lot of money to be sucked out of the economy.

So, expect stories to continue regarding job losses and business failures and we should hear more about those mortgagee sales, something which has not featured in the media for years.

For those of you whose financial position is not so dire, the next 12 months offer ample opportunities. With the change to a more “investor friendly” government and the likely relaxation of interest rates and credit policy, the next 12 months will provide great deals.

Now is the time to talk to your mortgage adviser if you want to get ready for them.