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Home / Hawkes Bay Today / Business

Volatility unsettling

By Jeremy Tauri
NZME. regionals·
25 Jan, 2016 02:30 AM2 mins to read

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Jeremy Tauri.

Jeremy Tauri.

Are low interest rates here to stay?

Economists are notoriously bad at trying to predict the future of interest rates so it would be hypocritical to assume that accountants could be any better at it.

But it is fair to say that it seems likely that low rates will remain in force through 2016.

Renewed global tumult over the past couple of weeks shows not everything is smooth sailing in international markets.

This puts pressure on interest rates and makes it more unlikely that the Reserve Bank will shift the official cash rate from its current historical low.

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This will create headaches in house prices, but should help lift spending and could drive our inflation rate up from its virtually non-existent level.

A stagnant OCR should keep short-term rates largely on hold. Longer-term rates tend to be dictated by international forces.

That throws up different things to think about if you are a borrower or an investor.

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Retirees are having to look at different options, but it's hard to get an income from their cash when equities are looking particularly volatile.

Borrowers meanwhile are eagerly trying to fix their loans at the cheapest possible point.

The problem for both is the future is impossible to predict with any degree of accuracy.

Move a chunk of your money into a more aggressively invested fund and you might find its value plummets the next week. Fix your home loan at what looks to be a great rate and it could be just days later that the bank comes out with an even better special.

Discover more

Jeremy Tauri: Advice for parents

28 Dec 03:30 AM

Jeremy Tauri: Your plan of action

04 Jan 03:30 AM

Jeremy Tauri: Save a little to save lots

11 Jan 04:00 AM

In both cases, the best idea is to look for a rate or solution that best fits your needs and personal circumstances, as well as your willingness to take on risk.

Think more about how your budget works than the advertised rates on offer or what your neighbour is doing.

Good advice becomes so important in times such as these.

- Jeremy Tauri is an associate at Plus Chartered Accountants.

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