OCR cut ‘not enough to provide stimulus needed’
Thursday, 27 November 2025
Mortgage pressure will ease further in the wake of the Reserve Bank’s latest cut to the official cash rate, but experts don’t expect house prices to start rising any time soon.
On Wednesday, the Reserve Bank cut the OCR by 25 basis points to 2.25%, and indicated it did not foresee any further cuts to come in this monetary policy cycle.
Following the announcement, BNZ, ASB, Kiwibank, Westpac and The Co-Operative Bank cut their floating home loan rates.
Ray White New Zealand chief executive Daniel Coulson said the cut was a step in the right direction, but did not go far enough to provide the stimulus the economy needed.
“Confidence remains fragile across households and business owners and [the] move is unlikely to shift behaviour in a meaningful way.
“The impact of constrained lending, elevated operating costs, and a soft labour market continues to put pressure on employers and employees alike.”
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Housing market stability
Thanks to past OCR reductions, the housing market was in a more stable position than it had been over the past couple of years, he said.
“Prices are yet to fully recover, but transaction volumes have returned to more traditional norms which provides a solid platform for activity and confidence.
“Increased momentum in the housing market directly influences construction, small business investment, and employment.”
But a stronger adjustment to the OCR would have provided greater momentum heading into the new year, he said.
For Realestate.co.nz spokesperson Vanessa Williams the cut was a positive move from the Reserve Bank and would help to ease the mortgage pressure on many households.
That would give more confidence to mortgage holders as they rolled off higher rates to lower ones and also to home buyers, she said.
“It won’t have an immediate effect on the housing market though. There was a real influx of new listings in October and November, and transactions have not sped up accordingly.
“So total stock numbers have continued to grow, and are now back at about the 36,000 level. That’s nearing the peak we saw earlier this year, and buyers are not acting quickly enough to absorb the stock.”
Until stock levels started to fall there would not be upward pressure on prices, she said. “It’s a good time for buyers to snap up a bargain as prices remain well below the 2021 peak.”
Sales activity likely to rise
Cotality chief property economist Kelvin Davidson agreed that Wednesday’s rate cut might not make too much difference to the housing market.
Not only had many banks lowered their fixed mortgage rates over preceding weeks, but they had been fighting hard with recent 1.5% cashback offers, he said.
More generally, given lower financing costs and the prospect of a stronger economy in 2026, there’s a solid case for thinking sales activity will continue to rise next year.
“That is likely to lead to a degree of growth in house prices too. The Reserve Bank predicts a rise of about 4% in 2026, and there’s no major reason to disagree.
“It would be a modest lift by past standards, but consistent with the fact we now have debt to income ratio caps.”
But LJ Hooker head of operations Allaine Burkett said the latest cut came at a time when buyer confidence was already rising.
“We’ve seen people returning to the market over the past quarter, and this decision reinforces that positive sentiment.
“With average repayments down roughly $485 a month, homeownership is suddenly within reach for a much broader group of people.”
Supply levels were also helping support a balanced market as buyers had more choice and sellers had more realistic expectations, she said.
“It’s a better environment for decision-making, and the easing of LVR settings on 1 December is also set to add momentum.”
“The combination of falling rates, stable prices and more flexible lending has created the most favourable environment in years.”