Key Facts

  • Milford Asset Management Portfolio Manager, Mark Riggell, has predicted a potential decrease in interest rates for mortgage owners in New Zealand.
  • The Reserve Bank of New Zealand (RBNZ) has maintained the interest rates at 5.5 percent for two consecutive months as of September, after having increased it by 525 basis points since the end of 2021 to manage inflation.
  • Inflation in New Zealand appears to be gradually decreasing, with recent figures from Stats NZ indicating the lowest levels since December 2021 at 5.6 percent.
  • Riggell has noted major changes in the market’s expectations for future interest rates, partially due to falling inflation rates in the US and New Zealand.
  • While he warns there is progress yet to made, the control of inflation is encouraging for investors.
  • Riggell anticipates a cut in interest rates could be likely, given the historical periods between the final hike and the initial cut, mentioning possible cuts starting in the coming year.

Article Summary

The coming months could bring positive news for Kiwis with mortgages as some financial experts predict a prospective drop in interest rates. Mark Riggell, Portfolio Manager at Milford Asset Management, cites major shifts in market measures of interest rates and a downward trend in inflation as the main triggers for this change. This marks a shift from previous forecasts which predicted ongoing high interest rates due to continued inflationary pressures.

The Reserve Bank of New Zealand (RBNZ) has held steady on interest rates for two successive months at 5.5%, following a substantial rise by 525 basis points since 2021 to counter spiralling inflation. However, recent data from Stats NZ indicates a declining inflation trend, with rates dipping to 5.6%, the lowest since December 2021. Riggell points out that in the US, inflation is falling, and in New Zealand, food prices have dropped almost a percent month-on-month.

Despite this optimism, Riggell cautions that there’s still “some ways to go”, as the year-on-year data still exceeds bank expectations. Yet, with inflation increasingly under control, investor confidence is growing. The question now is not if, but when the interest rate cut will take place. Analysing patterns from the last 50-60 years, Riggell suggested that the period between the last hike and the first cut could be short, raising the possibility of cuts starting as early as next year.

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