With the RBNZ increasing the cash rate to 1.5 per cent in April, as a property or business owner what can you do to prepare for the increase in the cash rate and interest rates? The cash rate is even expected to reach 3 per cent by the end of the year, so this means you might need to switch from a variable-rate to a fixed-rate loan!
What is the official cash rate?
The official cash rate is the interest rate charged on loans made between financial institutions, but which are ultimately passed on to customers through loan interest rate changes. This time, the increase in the official cash rate aims to rein in the looming inflation.
What does this mean for property owners and business owners? You would then need to budget for higher financing costs in the next couple of years. If you’re on a fixed-rate loan, you won’t be adversely affected by the increasing cash rates but you will be if you’re on a variable interest rate loan.
What can you do to overcome these challenges?
Even with the increasing inflation, unpredictable business interruption, supply chain disruption, and interest rate increases, many businesses are still confident – with business growth and increasing sales as their priorities overall. To achieve these, small businesses can invest more in staff training, development and deployment, more advertising, internal system and process upgrades, customer engagement, and new business and product development.
If your business is facing the prospect of cash rate changes, you can prepare for this by putting some money aside to boost your cash reserves and using cash flow management tools to update your cash flow and profit and loss forecast. You can also consider switching from a variable rate to a fixed rate, so you know your repayments will be the same even if the cash rate continues to rise in the future.
Business
Do you have any questions about your cash flow and profit and loss projections? Do you need assistance with preparing for the possible cash rate and interest rate increases? Just sing out and our team will be in touch to help you out! These are exciting and challenging times for businesses, so make sure you get the right advice moving forward.
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