Everyone is dealing with the impacts of Covid -19 and the prolonged drought that has our rural sector in its grip. Please seek help if you need it.
In terms of interest rates, we are, based on history in a low interest environment. However, this has gone even lower due to the global nature of this virus and its impact on markets and the uncertainty it has created.
The RBNZ cut the OCR to 0.25% in March in reaction to this, which has seen the majority and, in some cases, more than the 0.75% cut passed on to floating rates by the Banks.
Also, with this the swap/base fixed rates have dropped too.
The table below shows, on a macro level, the general rate movements across New Zealand over the past 4 months.
With so much uncertainty at present, its important at times like these to look at the things you can have some form of control over.
One of these could be your cost of borrowing.
You may, like a number of businesses in recent years have a large portion of your debt floating or coming off higher fixed rates, and due to the current interest rate environment and the near flatness of the swap rate curve, (as shown in the above table), and it may be worth considering looking at your current overall debt position and how this is structured going forward.
Do you have an interest rate strategy?
What is your average cost of borrowing and term lending spread?
How will your business handle an interest lift if all debt is left floating?
Are you aware of all the products and services your Bank offers, and can these be leveraged to help you manage your borrowings?
Actively managing this part of your business; having a strategy in place and working with your team of professionals could be one of the keys on how you get through this period of uncertainty.
Contact Alan Maxwell on 027 208 3860 today to discuss further.
Email - alan@bm.co.nz