It came as no surprise that the Reserve bank has kept the OCR at 0.25 per cent, hinting that it could be dropped lower in the future, just as the market beings to see some return to normalcy as the restrictions are lifted.

Here’s what you need to know:

Reserve Bank Keeps Official Cash Rate at 0.25 per cent

The Reserve Bank announced last week that it expects to see lower mortgage rates in the near future as it announced that the Official Cash rate will remain at 0.25 per cent. Although no mention of negative interest rates was made, the bank’s Monetary Policy Committee said it was prepared to use additional monetary policy tools “if and when needed”, including reducing the OCR further.

During a press conference the Reserve Bank Governor Adrian Orr indicated that the country’s retail banks haven’t as yet been passing on enough of the stimulus the RBNZ has been providing and expected “to see the full pass through” by banks of lower wholesale interest rates.

“As the economy comes out of lockdown, we expect a lift in lending market activity and increased competition from banks to put downward pressure on lending rates.”

On house prices, the RBNZ said it expected lower population & household income growth to cause house prices to fall, despite lower construction activity, lower interest rates, and the easing of loan-to-value ratio restrictions.

“Our baseline scenario assumes house prices will fall by around 9% over the remainder of 2020.”

Here it is to be added that House price movements are uneven across different regions and different suburbs, so one should do proper due diligence before proceeding with decision to buy or sell.

Number of House Sales drop 78.5% – but real estate activity picking up again

The Real Estate Institute has just released figures revealed that under the restrictions of Level 4, National house sales dropped 78.5 per cent in April, with only 1,305 sold last month compared to 6,082 sales in April last year.

Bindi Norwell, REINZ said the figures were unsurprising because for 27 days in April, New Zealand was in alert Level 4, and was hopeful for the future as sales slowly begin to pick up as restrictions have eased, “Talking to our members around the country, there are good levels of activity starting to occur with first-time buyers and investors active in the market which is a positive sign. We expect this to pick up.”

Budget Announcement: Government funding for 8,000 new homes

One of the most significant policies announced in the Budget was that the Government would provide funding for an additional 6,000 state or community houses and another 2,000 transitional homes – almost double the amount built in the last year.

One of the hallmarks of this Government’s housing policies is that it forms partnerships with private developers on new projects, which can see part of a development earmarked for state rental housing, part of it set aside for KiwiBuild homes and part of it for homes sold on the open market. The hope is with this injection, that getting these projects underway as quickly as possible will help with underpinning the construction sector at the time when that support is most needed.

-Ravi Mehta, for professional mortgage & insurance advice, speak to our experienced brokers for a free consultation and no obligation quote today. Our service is completely FREE. Contact the team at: Professional Financial Solutions 09 846 9934 or on our website – www.professionalfinancial.co.nz