Official cash rate rises again in New Zealand

New Zealand's official cash rate has risen yet again.

Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler reported in a July 24 statement that the financial institution had increased the cash rate 25 basis points to 3.5 per cent.

"New Zealand's economy is expected to grow at an annual pace of 3.7 percent over 2014. Global financial conditions remain very accommodative and are reflected in low interest rates, narrow risk spreads, and low financial market volatility," Mr Wheeler said.

"Economic growth among New Zealand's trading partners has eased slightly in the first half of 2014, but this appears to be due to temporary factors."

Mr Wheeler went on to say that construction was growing strongly, although immigration was leading to housing demand.

Essentially, the raise in the cash rate came about to contain inflation. While Mr Wheeler said inflation is moderate, output growth was forecast to raise inflation for non-tradables

The hope is that the increase to 3.5 per cent will keep average inflation levels in the 2 per cent target range.

With the cash rate on the rise again, now is the time for potential home buyers to consider their options when it comes to investment property in New Zealand.

Oftentimes a rise in the official cash rate will translate to higher interest rates, making it less affordable to obtain a home loan.

At the same time, prospective investors can take heart that Mr Wheeler said it would be wise for the RBNZ to analyse how its raising of interest rates has affected the nation's economy before increasing them further.

This could indicate that current rates will remain available for some time. Some wise property investment advice might be to take advantage of them before they're gone.

Here's to your financial independence!

Daniel Carney
Authorised Financial Adviser / Investment Property Expert