The Reserve Bank has cut the OCR (Official Cash Rate) by 25 basis points
Time to celebrate?
- Yes, Reserve Bank of New Zealand has finally reduced the OCR by 25 basis points.
- Yes, more OCR drops are expected by the market or definitely hoped for.
- Yes, the banks of late have reduced the interest rates a little bit
- Yes, the interest rates have travelled from a little over to a little less than 7% for short term
- Yes, most people are fixing short term in expectation of the interest rates falling further
Time to book a luxury cruise holiday?
Probably not yet, if anytime soon.
Yes, there has been one OCR drop and more expected. But hey, one does not need to be an economist to realise that the variables pulling & pushing the interest rates in different directions are changing all the time and so may the outcome or at least the momentum.
We have seen this in the past and we can learn from it. For those of us who have managed to crawl out of the ridiculously low interest rates regime mindset (2-3% in mid-2021), will do best by not forgetting in a hurry the pain of sudden increase in rates, throwing our cashflow all over the place, and instead, learn from it.
I only hope that most of us have managed to adjust to (almost definitely not yet wriggled ourselves out of) the chaotic cashflow caused by the rather abrupt & sharp loan repayment increases, thanks to the steep and continued interest rates journey north, since mid-2021, which together with high inflation made it even worse.
Yes, of late, we notice some news of respite, even if this has yet to show any meaningful impact on actual household cashflows. But yes, there has been some downward movement in the interest rates, and it is said the inflation is coming down too – I only hope my local grocer knows this.
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What next? Will this continue?
It is believed it might or at least, so is hoped for. I hope so too, even if I am not dreaming of the mid-2021 interest rates anytime soon, if ever.
Lessons to learn?
- The age-old saying – when the times are good, prepare yourself for bad times.
- Not saying to not celebrate when times are good – not denying the balance in life and all.
Balance in life is exactly why we need to save when times are good or at least not so bad.
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In the last 3 years and a bit so far, I saw people struggling and I saw people who did feel the pinch but managed rather well enough because they had savings to ride it out. Never ignore reviewing your lending structure constantly. The circumstances change all the times, so do your needs. These reviews could potentially save you a lot of money. Talk to your bank or mortgage adviser.
No denying the fact, there is no substitute for savings.
- Save when times are good for when they are not as good
- Save when you are young for when you will not be anymore.
- An average of 23% of people aged 65-69 in OECD countries are still working. (Source: istock.com)
At 70, no issues with working out of choice but to put food on the table?
Think about it.