Article: Our House = Our Home

A Housing Market Slow-Down  and Interest  Rate 101 with Carie TownleyA Housing Market Slow-Down and Interest Rate 101 with Carie Townley

This week we share a quick lesson on the role of a central bank and who calls the shots in our country. Plus, ANZ crunch the data and confirm a housing slow down and an unremarkable national economy over the next few years. Read on.

Yes, our housing market is slowing, but so is everyone else’s
Our housing market has become less road runner and more sloth. And we’re not the only country seeing a slowdown. So, do we blame global events outside our control?

According to the latest ANZ research probably not, but maybe… We’ve had a mix of policy changes and skittish investors retreating to shares and cash.

Plus, affordability is starting to bite. Auckland’s crazy growth is finally too crazy and people just can’t pay those prices. Fun fact — it’s probably worse for our cuz’s across the ditch. Especially in Sydney and Melbourne. At least here, credit is still easily available, so if you decide to go for it, you can borrow. Not so in Oz, where there’s a credit squeeze. And here, if worse comes to worst, the RBNZ has a little interest rate ammo in the barrel and can drop rates to spur growth.

Don’t sneer —the experts at ANZ really think the next RBNZ move could be down. Either way, they’ve crunched the numbers and found that for the next few years, our economy will be a tad beige at best.

Interest rate 101
What’s a central bank?

This is a country’s primary monetary authority and it decides on the interest rate. Ours is called the Reserve Bank of New Zealand, known as the RBNZ. Other examples include the European Central Bank, the Bank of England and the Federal Reserve in the US. The RBNZ is independent of politics, so it can’t be dictated to by the PM or anyone else. So we usually get what’s best for the economy; not short-term political objectives, like lowering rates during an election campaign.

Who makes the decisions?
The RBNZ’s people are very smart and they get out a lot. Eight times a year they pass judgement on the latest inflation figures, economic growth, the employment rate etc. They also look at what’s going on overseas and how that might affect us.

This is in your interest
The RBNZ uses interest rates to control economic activity. It raises them to keep the inflation genie square in its bottle and drops them to stimulate demand and investment. The principle is that if rates are higher, less people will want to borrow money and economic activity will slow and so will prices and that means inflation slows. And vice versa.
Class dismissed!

For a personal mortgage reduction analysis to identify the strategies that are in your best interest, contact Carie today on 0275 228 940, email .(JavaScript must be enabled to view this email address).

 

 


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