RBNZ cuts cash rate by 25 basis points

The Reserve Bank of New Zealand (RBNZ) has cut its official cash rate by 25 basis points to 5.25%. This is the first rate cut in over four years. The central bank has also signaled that more easing is likely in the future. Watch the Monetary Policy Statement media conference live here at 3pm: https://t.co/BMwSeUXvR3#rbnz #MPS #monetarypolicystatement #OCR pic.twitter.com/FilmeAHVZW — Reserve Bank of NZ (@ReserveBankofNZ) August 14, 2024 Expectations are that the rate could drop to 3.85% by the end of 2025. The unexpected move caused the New Zealand dollar to tumble, and markets began to anticipate a more aggressive easing path. Today the Monetary Policy Committee agreed to reduce the Official Cash Rate by 25 basis points to 5.25%. New Zealand’s annual consumer price inflation is returning to within our target band of 1-3%. The CPI is expected to remain near the target mid-point over the foreseeable… pic.twitter.com/7jDJ9iAQ6V — Reserve Bank of NZ (@ReserveBankofNZ) August 14, 2024 Current market pricing suggests that the policy rate could be near 3.0% by 2025. This action aligns New Zealand with the global trend of monetary easing. Central banks worldwide are responding to slowing economic growth and inflation pressures. Mortgage relief is on […]

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Mortgage rates fell slightly last week, with the average contract interest rate for 30-year fixed-rate mortgages decreasing to 6.54% from 6.55%. This small drop led to a surge in refinancing activity, with applications increasing by 35% compared to the previous week and 118% compared to the same week last year. Despite the slight decrease in rates, applications for home purchases only rose by 3% and remained 8% lower than the same week one year ago.

Homebuyers continue to face challenges such as high home prices and low supply, in addition to elevated interest rates.

Joel Kan, an MBA economist, stated in a release, “The refinance index also saw its strongest week since May 2022, driven by gains in conventional, FHA, and VA applications.”

The refinance share of mortgage activity increased to 48.6% of total applications from 41.7% in the previous week, a significant jump from the 29% share seen a year ago. Mortgage rates started this week relatively flat, but the release of the government’s monthly inflation report, the consumer price index, could potentially impact rates.

Matthew Graham, chief operating officer at Mortgage News Daily, noted, “There’s no way to know ahead of time whether the data will be friendly or damaging–only that CPI is responsible for some of the biggest spikes and drops over the past few years.”

Experts predict that home equity borrowing rates, including both home equity loans and HELOCs, are likely to drop in the fall of 2024. This expectation is based on the Federal Reserve’s plans for rate cuts, with the central bank indicating that a rate cut is being considered for September. Bill Westrom, CEO of Truth in Equity, anticipates a 0.25% to 0.50% reduction in the prime rate by the end of the year, stating, “From an economic perspective, a slight reduction would give us a little boost and relief without adding to inflation.”

Unless there is an urgent need for funds, experts suggest waiting for rates to fall further before borrowing.

Mortgage refinancing surge outlook

Debra Shultz, vice president of lending at CrossCountry Mortgage’s The Shultz Group, advises, “I don’t see the rush. Rates are trending down, and these products aren’t going anywhere.”

However, for those who need cash quickly and cannot afford to wait, borrowing now may be the best option.

John Aguirre, a mortgage broker at Loantown, recommends, “If you’re able to meet your goals with the current rate and repayment plans, then execute now and take any risk off the table.”

Regardless of when borrowers decide to take out a home equity loan or HELOC, it is essential to shop around for the best loan and lender, comparing rates, fees, terms, and repayment details to ensure the best product for their needs and budget. As of August 13, 2024, the average rate for a 30-year fixed mortgage is 6.59%, a decrease of 0.10% from the previous week. The average rate for a 15-year fixed mortgage is 5.99%, a decrease of 0.15% compared to a week ago.

These changes in mortgage rates have occurred as the economy anticipates the release of new inflation data. With inflation going down, the Federal Reserve is positioning itself to make its first interest rate cut later this year, which is expected to lead to a decline in mortgage rates in the coming months. To secure the lowest mortgage rates, experts recommend saving for a larger down payment, improving credit scores, paying off debt, and exploring various loan options and assistance programs.

While the housing market remains challenging, the potential for falling mortgage rates provides hope for prospective homebuyers.

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