The good news is that the inflation numbers were down on predictions. It’s a kind of good news story but it still came in at 6.7% which is way out of the target range of 2-3%. But, in this environment, we will take any good news we can get. I think it is still far too early to be celebrating but there is light at the end of the tunnel.

What does this mean for rates? 

I think we are close to the top of where rates will go. They might increase a little more but if inflation starts trending down then there wouldn’t be a need to keep raising them. Also, the pain is now starting to be felt and we still have 60% of loans to roll off this year. I think the reserve bank will increase by 25 basis points and then hold steady from there. We have to wait and see.

Bank competition

After spending 10 years with a main bank, I have seen from the inside how they react. Profits will be down so banks will be very keen to keep the rates as low as they can to get business through the door. I think that will be a factor that will continue to help through the remainder of the year.

What does it mean for house prices? 

I think house prices will continue to decline over winter but I wouldn’t be too sure if it will go much further then that. There are some positive underlying factors that will support the market. Net migration is far stronger than anyone anticipated and this will be timed with construction slowing down. We also have rates turning the corner sometime soon. 

The other thing to think of is all the first home buyers that are holding off right now. The demand is building up and it will need to be realised at some point. I get the feeling that when rates turn and people think the bottom is past we could have some house price growth. Again we wait and see.

Disclaimer:

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