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What’s up kiwis. As we step into 2025, there are some opportunities and challenges coming your way across various financial and economic sectors. Our financial advisory team sum up the challenges and opportunities that could be in store!
It’s generally good news for mortgage holders. In 2025, interest rates are expected to stabilize as the Reserve Bank of New Zealand (RBNZ) continues to lower the Official Cash Rate (OCR). So, hooray for lower repayments! With these lower rates, you could see a decent reduction in your mortgage payments, freeing up more cash for other expenses, savings or investments and making it easier to plan ahead. This is especially good news for first-time homebuyers and those refinancing existing loans. However, I will still stress that it is SUPER important to keep making good choices round emergency cash savings and managing other debt wisely, so you remain financially resilient through the year!
- Lance, Financial Adviser.
Personal insurance policyholders, get ready for a slight increase in premiums for life and health insurance this year. Rising healthcare costs and inflation are the main culprits behind this bump. However, there's a silver lining: insurers are introducing more flexible and customizable plans to better meet your needs.
For instance, many insurers now offer modular plans where you can select the coverage options most relevant to you. This could include add-ons like critical illness cover, income protection, or even wellness benefits that reward you for maintaining a healthy lifestyle. This means you can tailor your coverage to match your specific circumstances, ensuring you get the most value for your money.
Keep an eye out for promotions and discounts, as many insurers offer incentives for new policyholders or loyalty rewards for long-term customers. Make sure to talk to us to ensure you have coverage that fits your needs in 2025.
- Simon, Financial Adviser.
Ensuring you have the right sums insured for the current replacement value of your assets, stock, contents, and machinery is going to be crucial this year. The cost to rebuild or repair properties and replace items has dramatically increased due to recent impacts of inflation and persistent skilled labour shortages. Adding to the pressure is the persistently lower NZD, hovering around US$0.61 (as of October 2024), although supply chain issues are starting to improve.
It's important that we work together to ensure you have the correct valuations and sums insured for your insurance policies. Given the lower-than-expected number of weather-related claims paid and with reinsurance costs stabilizing overall, we are seeing pricing rates and premiums flatten for claims-free risks that are not prone to catastrophe peril locations, such as earthquakes. Commercial property premium rates have flattened for claims-free, non-catastrophe located risks.
Home building and contents insurance remains a market suffering losses, and we still expect to see increases of 10%+ depending on dwelling locations, with more significant increases in high-hazard areas. Motor premium costs are steadying; however, the reliability of offshore vehicles, parts, and increasing labour prices means motor premiums continue to be above general inflation levels. Liability and professional lines, due to the longer-term improved outlook for investment returns on reserves, particularly if inflation continues to moderate, should see rates reduce in these classes of business.
– Joshua, General Manager & Insurance Adviser, Caveo.
Business owners, 2025 is looking like a mixed bag for you. On the upside, lower interest rates mean cheaper borrowing, presenting a prime opportunity to invest in your business. However, New Zealand's economic recovery might be sluggish, potentially impacting consumer spending and business growth.
Focusing on your financial resilience at this time is crucial. Build a robust cash reserve, manage your debt wisely, and keep a close watch on your expenses. Seek opportunities to expand your customer base, whether through exporting your products or tapping into underserved local markets. Also, consider collaborating with other businesses to share costs and customer databases. Stay agile and proactive, lean on your mentors & network for support, and professionals for advice. I am happy to have a coffee or beer with you if you want some help in 2025.
– James, Financial Adviser & Business Owner
In 2024, the new National government rolled out fresh incentives to boost your KiwiSaver contributions, including better employer matching and tax perks. You have more choice in how to invest as well, as KiwiSaver providers continue to offer more diversified investment options, like green stocks, which have a track record of strong performance.
This year, make sure you're not stuck in a default fund. Choosing the right fund that aligns with your risk tolerance, time frame, and goals can make a significant difference in the long run! Even small increases in your contributions can have a big impact over time, thanks to the magic of compound interest. Focus on net returns rather than just fees, and don't hesitate to seek expert advice to maximize your KiwiSaver settings.
– Tania, Financial Adviser.
With interest rates looking to stabilize more in 2025, you can breathe a bit easier knowing your savings and investments are holding steady. But don't let your guard down—keep an eye on inflation, as it can quietly chip away at your purchasing power. At this stage in your life, it's wise to diversify your income sources for better financial security. Think about blending in pensions, dividends from stocks, rental income, and maybe even some part-time work if you're up for it.
Inflation is a tricky beast, so consider investments that tend to outpace it, like stocks and real estate. I talk about it a lot but make sure you have a cash emergency fund—aim for at least 6-12 months' worth of living expenses in a high-interest savings account—so you don't have to dip into your long-term investments when unexpected costs pop up. Regularly reviewing and adjusting your budget to match your current financial situation and goals is so important, especially as expenses and healthcare costs change with age. And remember, don't hesitate to seek advice if you need it.
– Dean, Financial Planner and Adviser.
I think investors may be feeling cautiously optimistic in 2025. Lower interest rates mean borrowing to invest is cheaper, so it potentially a good time to look at expanding your portfolio. Take the opportunity to diversify your investments across different asset classes—such as stocks, bonds, real estate, and commodities—to help mitigate risks and provide more stable returns.
Sectors that are likely to perform well in a low-interest-rate environment include technology, healthcare, and consumer goods. Adopting a long-term investment strategy, such as dollar-cost averaging, and maintaining a well-balanced portfolio, will position you well for future growth beyond 2025.
– Giovana, Financial Adviser.
First home buyers, 2025 is looking promising for you! Government schemes like Kainga Ora’s First Home Loan are still available, allowing you to purchase a home with just a 5% deposit. Also, don't forget about the KiwiSaver first-home withdrawal, which lets you use your KiwiSaver savings for your deposit if you've been a member for at least three years. This can significantly boost your purchasing power!
Despite challenges like high interest rates and cost of living pressures, you have been leading the market in purchasing homes, and I believe this year will be no different. With stabilized house prices and more properties on the market, you'll find plenty of good opportunities, especially in suburban and regional areas where prices are more affordable.
Lower interest rates make borrowing more attractive, reducing your monthly mortgage payments and making homeownership more accessible. It's still a buyer’s market (for now), so get amongst it and make the most of these opportunities!
– Manisha, Financial Adviser
Best wishes for the year ahead everybody,
The VF and Caveo Team.
This article was written by our team financial advisers and edited by Shona.
Disclaimer: This post is intended as general advice. Before you make any decisions, discuss your situation with an adviser from Velocity Financial, and seek advice from professionals, such as a lawyer and accountant, to find the best solution for your unique situation.
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https://www.velocityfinancial.co.nz/disclosure-statement