My parents got some sort of government loan to build their house in the mid 1950s. I’m not sure if it was becasue Dad was a returned serviceman or if these loans were available for anyone, but I do know the interest rate was fixed at 3%.
I don’t think rates have been that low since then but Reserve Bank governor Alan Bollard has nearly taken us back to those times by reducing the official cash rate from 5% to 3.5%.
His rationale is continuing global uncertainty and confidence that inflation will be “comfortably within the 1 – 3 percent target band in the medium term.”
Interest is one of the bigger costs for farmers, not just for the mortgage but for working capital, especially those in areas like sheep and beef or crops where they get paid in big lumps a few times a year in comparison to dairying where you get a monthly cheque.
The change in the OCR won’t have an immediate impact on existing loans but it should give confidence that we’ll be paying less interest next time loans are negotiated.
It also reinforces tha major difference between what’s happening now and the ag-sag of the 1980s when interest rates and inflation were higher than 20%.