‘Meh’ OCR cut won’t unlock a house price rebound

Thursday, 29 May 2025

The Reserve Bank’s OCR cut has already led to banks offering lower mortgage rates.

The Reserve Bank’s latest cut to the official cash rate might give home buyers and sellers more confidence, but it won’t lead to a strong surge in house price growth, experts say.

On Wednesday, the Reserve Bank lowered the benchmark rate by 25 basis points to 3.25%, and it also updated its forecasts to suggest it was more likely than previously expected that the cash rate would fall below 3%.

The cut was expected by banks, and BNZ jumped the gun and lowered its rates on Tuesday. ANZ, Westpac and Kiwibank followed with reductions after the Reserve Bank announcement.

Quotable Value operations manager James Wilson said the softer track for interest rates would have an impact on home buyers and sellers who had been considering whether to make a move.

“For a group of buyers, today’s announcement will signal that now is the right time, but it won’t lead to a mad surge of buyers into the market. There are others who will keep waiting.

The OCR cut won’t lead to a mad surge of buyers, Quotable Value’s James Wilson says.

“That applies to people looking to refinance or refix mortgages too as we hear people have been waiting for a cut and lower rates, so it will unlock some activity.”

But while the cut might drive more buyer optimism and confidence, it was unlikely to lead to a big rebound in prices, he said.

“There’s still a lot of stock on the market, and so there’s softer competition than there has been in years. And our clients tell us there is a lot of caution about employment and the economy out there.

“Overall, the OCR cut is positive for the market, but until the stock of homes starts selling more quickly, and competition gets a bit tougher, it won’t unlock the sort of strong price growth that some people want.”

For Realestate.co.nz chief executive Sarah Wood, there were some persistent trends at play that meant she did not anticipate the cash rate cut would lead to much change in the market.

A particularly high number of houses - 35,000 - were for sale and a good number coming on to the market each month, she said.

“We’re going into the winter slowdown, and there is a background of global economic uncertainty.

There is a high amount of stock on the market, with about 35,000 homes currently for sale.

“But sales have been trending higher, and there is some momentum in the market, so we’ll have to wait and see if the cut impacts.”

What would be interesting to see was whether the cut impacted on people’s decisions around the terms they fixed their mortgages for, she said.

Cotality chief property economist Kelvin Davidson said the Reserve Bank’s decision was widely expected, and for the housing market nothing much really changed as a result of the decision.

“Some banks were already trimming mortgage rates a little in advance of the decision, and although another renewed bout of competition is always possible, the largest rate falls may well be behind us.”

The interest rate cycle is not far from the bottom now, Opes Partners' Ed McKnight says.

Opes Partners economist Ed McKnight said the Reserve Bank’s commentary signalled lower rates might be coming for people hoping to get the lowest rate possible.

But unless there was a significant economic shock, the interest rate cycle was at, or not far off the bottom of the cycle, and rates would not drop too much further, he said.

“As an investor, any rate drop is good and I’ll take it thanks very much, and other home buyers and mortgage holders will probably think so too.”

House price growth has been muted but the Reserve Bank was indicating a modest increase by the end of the year, he said.

“It’s comforting for homeowners and investors that the Reserve Bank does see a path out of the tough market, and is suggesting we might see 4% to 5% growth each year over the next few years.”

But Bayleys Auckland chief executive Lloyd Budd was disappointed in the Reserve Bank’s decision as he wanted to see a bigger cut.

“We were starting to see some green shoots in sale volumes, and a bigger cut would have supported those shoots to become stronger.

“Instead we have a cut which is a bit ‘meh’ really, on top of last week’s Budget which didn’t provide much for home buyers or investors, and we’re coming into the slower winter months.”

The positive aspect of the announcement was that it would not prevent people who had buying or selling plans in motion from continuing with those plans, he said.

“But it’s not the jolt needed to get more first home buyers into the market, or to prompt investors to do some development spending which would support the construction industry.”