New Zealand Herald Business Editor, Liam Dann, reveals what the latest decision around the OCR means for New Zealanders
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A South Auckland couple working four jobs between them to pay their mortgage say they are contemplating moving to Australia after the latest Official Cash Rate (OCR) rise.
“We would have no other option but to migrate to another country,” Sunny Saharan, 37, and his wife Pooja Saharan, 34, said, telling the Herald they are short $450 every week.
The Reserve Bank (RBNZ) raised the OCR by 25 basis points to 5.5 per cent yesterday – and in a surprising move, said this was the OCR’s peak and anticipated cuts from late next year.
Economists and mortgage brokers were taken aback by the forecasts, given prior expectations were for a peak OCR of 6 per cent, with lower-than-expected forecast rates signalling a potential reprieve for homeowners.
Within minutes of the announcement, ASB lifted its interest rates. Its Housing Variable rate will move from 8.39 per cent to 8.64 per cent while the Orbit home loan rate moves from 8.49 per cent to 8.74 per cent.
The Saharans said their mortgage is unaffordable and if rates don’t drop when their current interest rate of 6.7 per cent expires next year they will leave the country.
The pair are juggling monthly $4500 mortgage repayments with raising their 1-year-old, Summer, and simply trying to survive.
Sunny Saharan and his wife Pooja are juggling their mortgage payments with holding down multiple jobs and raising 1-year-old Summer.
Sunny is a senior client lead at Spark during the day, and by night he’s an Uber driver. He’s looking to take on a third job in security at the weekends. Pooja works full-time at Countdown and runs a part-time catering business from home.
They say Australia beckons, with a lower cost of living and better job opportunities.
“I don’t even know what’s going to happen ... if I will be able to keep my house or sell it,” Sunny said.
“Moving to a different city will not make any difference because the OCR will still be high, and so will the cost of living everywhere. It’s not just about the OCR, it’s about the cost of living explicitly.
“If the OCR comes back to between 3 and 4 per cent, it will still be manageable for us, we would not have to take on five jobs altogether.”
Most of the couple’s income goes towards the mortgage after buying their house for $805,000 three months ago.
The average monthly mortgage repayment in Auckland is about $4425.
“Even after working as an Uber driver for five days, I am short of $450 every week,” Sunny said.
“Kids’ nappies and other baby stuff are so expensive that it’s costing an arm and a leg,” Pooja said.
National Party leader Christopher Luxon called the OCR hike a “bloody outrage, a real kick in the guts for Kiwis”, and said he didn’t buy the RBNZ’s forecasts for cuts from the third quarter of 2024.
“We’ve seen a rolling set of forecasts for the last 18 months, so I’m a little sceptical about the forecasts and the outlook going forward,” Luxon said.
“This is the 12th increase we’ve had in just over 18 months. If you are a New Zealander dealing with a mortgage, this is incredibly tough. You don’t just magic up the money [for higher mortgage repayments].”
CoreLogic chief property economist Kelvin Davidson said the moderate rates hike was little surprise, given inflation has started to slow and forecast inflation had pulled back.
Davidson said the RBNZ had been “less reactive to recent stimulants such as the Budget and higher-than-expected net migration”, with yesterday’s 25-point rise.
And though there was light at the end of the tunnel, mortgage rates weren’t expected to decrease in a hurry.
“It would now be very surprising to see short-term mortgage rates change much, if at all”, but “the extra strain on those existing borrowers who are yet to see their fixed loans reprice onto current rates is still to come”.
Claire Williamson, director of mortgage brokerage My Mortgage, said the fact 5.5 per cent was the peak was “good news for first-home buyers” but the latest hike would see “whopping” increases for current homeowners needing to refix this year.
Prior to the OCR announcement, Infometrics principal economist Brad Olsen said people were tightening their belts as budget pressures continued to ramp up.
“That means they will focus on the essentials first, putting food on the table and a roof over their heads.
“The challenge is that the cost of essentials and food prices are up by 12.5 per cent over the last year. The Government at least is currently responsible and suitably contributing to inflation remaining higher for longer.”
Sunny said the financial pressure was having a huge impact on their personal lives. Anxiety, stress and other health issues were the consequences.
