OCR cut: What falling interest rates mean for Kiwi travellers

Falling interest rates will help those with mortgages free up cash for holidays, one of the country’s biggest travel agents says.

Flight Centre NZ managing director Victoria Courtney said mortgage rate reductions around the Official Cash Rate (OCR) cut would help boost what was a soft part of the strong overseas travel market.

The Reserve Bank has lowered the OCR by 50 basis points to 4.75%. Banks have lowered some mortgage rates by the same amount and deposit rates have also been cut.

Somebody with a $500,000 mortgage would be better off by about $50 a week with a 0.5% cut.

Courtney said those in the mortgage belt would be starting to feel happier.

“It’s been families that have been slower to return to travel, and the demand from those groups has softened. That’s certainly the group that we think [the] announcement will benefit. That confidence that cost-of-living pressures will ease will allow them to start planning that trip to the Gold Coast or further afield.”

While the savings for those with loans would vary, it was the downward trend that would boost confidence.

But those with money in the bank and enjoying relatively high interest rates had been leading the drive to travel overseas since the pandemic.

While they were facing lower bank rate returns, they were less price-sensitive when it came to spending on travel. All travellers will face higher on-the-ground costs overseas, given the fall in the kiwi dollar.

The kiwi slid by about quarter of a US cent to US61.03c after the Reserve Bank announcement.

Against the Aussie dollar, it dropped by about half a cent to A90.50c.

But all travellers were benefiting from falling international airfares.

“While there could well be an impact [from the falling kiwi] on those travellers who are spending their savings, I think we’re also currently seeing international fares continuing to drop and so hopefully it will balance that out,” said Courtney who is also Flight Centre’s global supply leader.

“The kiwi dollar doesn’t necessarily take you as far as it used to, although having said that, we’re seeing huge demand for the US at the moment on the back of increased capacity and lower airfares. As Kiwis always do, they look for a bargain and are looking for different options.”

Summer services were about to start and good “earlybird” deals were now back in the market. While not down to pre-pandemic levels, they were much lower than for the past two years.

Flight Centre data shows some carriers are offering long-haul fares that are down 30% on this time last year.

The firm is advertising return fares on Singapore Airlines to Copenhagen starting at $2055.

“If you are flexible with dates and book ahead, you can get return flights for under $2000. We’ve seen more airlines offering competitive prices and new routes, so it has really opened up a world of choice when it comes to stopovers, too.”

Courtney said Kiwis were travelling for longer but staying longer in each place. In Europe, Italy and Greece had been popular during the New Zealand winter.

Courtney encouraged Kiwis to look at all the options that are available to them, because if having a flat bed was of high importance, ”there’s probably some of those that you can get at the price of a premium economy seat and on some other carriers.”

“Many may be out of practice with long haul so a package deal, where we have flights, accommodation, transfers and more in one booking, can lighten the load both financially and help your stress levels.”

Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.