RBNZ trims OCR as housing momentum builds

The Reserve Bank has trimmed the Official Cash Rate by 0.25 percentage points, reducing it to 2.25% in a move that confirms monetary policy has shifted firmly into support mode. LJ Hooker Head of Research Mathew Tiller said the Bank is responding to below-trend growth and easing inflation pressures.

“Household demand is patchy, hiring is cautious and unemployment has lifted, all signs of spare capacity in the system,” Tiller said.

“With inflation easing and expectations anchored, the Bank had room for a modest cut without reigniting price pressures.”

He says the housing market is already showing early-cycle improvement.

“Sales are higher than a year ago and days on market are beginning to shorten. This cut will sharpen borrowing costs at the margin and help consolidate recent price gains, especially in markets rebounding from lower bases.”

Tiller notes rental conditions continue to soften.

“More stock and flatter rents are giving long-term renters the confidence to consider homeownership, especially with improving serviceability.”

He said mortgage rates are likely to edge down further.

“With the OCR now at 2.25%, we expect rates to settle a little lower, supporting a solid lift in activity through 2026.”

According to LJ Hooker Head of Operations NZ Allaine Burkett the latest cut comes at a time when buyer confidence is already rising.

“We’ve seen people returning to the market over the past quarter, and this decision reinforces that positive sentiment,” she said.

First-home buyers are driving the resurgence, according Cotality.

“They made up 27.7% of all purchases last quarter and in Wellington that figure reached 36%. With average repayments down roughly $485 a month, homeownership is suddenly within reach for a much broader group of people.”

Burkett said supply levels are also helping support a balanced market.

“With 33,588 homes listed in October, up nearly 4% on last year according to realestate.co.nz, buyers have more choice and sellers have more realistic expectations. It’s a better environment for decision-making.”

The easing of LVR settings on 1 December is also set to add momentum.

“More flexibility for high-LVR lending, particularly for owner-occupiers, means banks can support more borrowers who have strong incomes but smaller deposits.”

Burkett said the combination of falling rates, stable prices and more flexible lending has created the most favourable environment in years.

“Activity is broadening, confidence is returning and buyers feel they can move with clarity.”