Source: Cotality, Commentary by Chief Property Economist Kelvin Davidson
The Reserve Bank’s Monetary Policy Committee delivered the widely expected 0.25% cut to the official cash rate (OCR) today, taking it down to 2.25%.
An initial read of the commentary and the detailed forecasts suggests a likelihood this will be the final cut in the cycle, with time now for everyone to sit back and watch how the effects play out.
To provide some context around that, the RBNZ expects GDP to have risen by more than 1% over the final six months of this year, with calendar year growth accelerating to around 3% in 2026. Employment is thought to have troughed already, with the unemployment rate set to ease down to 5% over the course of next year. Headline inflation should also drop from here.
The forward track for the OCR itself bottoms out at a quarterly average of 2.20% in Q2 2026, which implies the possibility of a further OCR cut at some stage. But if the ‘green shoots’ strengthen and the economy performs as expected, the chances of that cut seem small. At this stage, the RBNZ doesn’t think there’s much scope for the OCR to rise again until 2027.
In the housing market, today’s rate cut may not make too much difference. After all, many banks had already been lowering fixed mortgage rates in previous weeks(especially for the one-year term) and of course fighting very hard on the recent 1.5% cashback offers.
More generally, given lower financing costs and the prospect of a stronger economy in 2026, there’s a solid case for thinking that property sales activity will continue to rise next year, which is also likely to lead to a degree of growth in house prices too. The RBNZ itself 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.
