A brief discussion on interest market rates and LVR

by Fundmaster Official

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Mar 21, 2022

A brief discussion on interest market rates and LVR:  

Unconditional with Dev & Ashley 

Highlights from the discussion: 

  • Brief reflection on the interest market rates and LVR 
  • Drawing a parallel relation between inflation and interest rate 
  • Advice for first home buyers from Dev and Ashley 
  • Ashley’s viewpoint on OCR and how RBNZ controls it 

In New Zealand, the rising interest rates are a red flag for those planning to borrow a loan. It seems that besides the first home buyers, the existing homeowners might also come under the scanner of fluctuating interest rates. To help borrowers, Dev and Ashley reflect on the interest rate market, where it has been, tracing its history and offering a good insight into the current situation.    

On delving into the reason behind fluctuating interest rates, Ashley strongly believes it’s due to OCR (Official Cash Rate), which the Reserve Bank controls. According to him, for the Banks, the cash rate is almost like a god because they judge mortgage interest rates based on it. You can say that RBNZ uses interest rates as a weapon to control inflation. 

It’s often found that some borrowers fall back when it comes to setting long term financial goals. Therefore, before making any decision, home-buyers must thoroughly understand the market situation and lock their mortgage deals accordingly. 

There’s a parallel correlation between inflation and mortgage interest rate; the higher the inflation, the higher the interest rate. To enhance the borrowing power of the kiwis, the Reserve Bank switches to a low rate of interest.  

The house price will keep rising until inflation is under control. In this context, Dev’s advice is people need to plan their finances by aiming for short-term and long-term goals. Consulting a mortgage broker can prove fruitful if they find it challenging to keep track of their spending behaviour.  

Being closely associated with the lenders and having a good knowledge of the interest rate market, a broker can help you assess your financial situation so that you can make the right financial decision. 

Please watch this informative video and share your opinions on interest rate prediction. For any enquiries reach us at fundmaster.co.nz.  

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