By: NZ Mobile Mortgages Team
Source: www.businessdesk.co.nz
As New Zealand navigates its economic recovery, recent developments from the Reserve Bank offer a glimmer of hope for homeowners, investors, and prospective buyers alike. On April 9, 2025, the Reserve Bank of New Zealand (RBNZ) reduced the Official Cash Rate (OCR) by 25 basis points to 3.50%, marking its fourth consecutive cut since August 2024. The housing sector, sensitive to interest rate changes, is now under the spotlight as stakeholders assess the potential impacts of this monetary policy shift.
With the OCR reduced to 3.50%,there’s renewed optimism in the air, signalling a potential shift in the housing and mortgage markets. For many, this move could be the first step towards more affordable borrowing costs and a revitalized property market. As the ripple effect of this decision unfolds, it’s important to consider what this means for the future of the housing market and how it may influence everything from mortgage rates to buyer confidence.
“OCR could further decrease to around 2.67% by the end of 2025”
Let’s have a quick look at the chatter in the housing sector:
REUTERS stated that the OCR reduction is expected to lead to lower mortgage rates, making borrowing more affordable for both homeowners and investors. Economists anticipate that the OCR could further decrease to around 2.67% by the end of 2025, potentially bringing one-year fixed mortgage rates down to between 4% and 4.5%. This environment may encourage more buyers to enter the market, although the extent of rate reductions will depend on how banks adjust their lending rates in response.
Source: www.opespartners.co.nz/property-markets
The housing market has shown signs of recovery, with residential property sales increasing from a low of 59,705 in mid-2023 to 72,826 by February 2025. While the OCR cut is expected to provide further relief to the housing sector, price gains have been modest, averaging about a 2.5% increase since mid-2023. Experts anticipate that house prices could rise by approximately 5% in 2025, driven by lower interest rates and increased buyer confidence (RNZ)
“Recent data indicates a growing preference for short-term fixed-rate loans”
The New Zealand Institute of Economic Research (NZIER), in their quarterly predictions in March 2025, stated that property investors are positioning themselves to take advantage of the easing interest rates. Recent data indicates a growing preference for short-term fixed-rate loans, reflecting confidence in lower borrowing costs ahead. However, the market remains cautious, with affordability challenges and regulatory changes influencing investment decisions.
According to Kiwibank, in their housing market forecast (2025), the RBNZ has introduced mortgage lending restrictions to mitigate financial stability risks associated with high household debt and rising home prices. These measures include debt-to-income (DTI) ratios and loan-to-value ratio (LVR) adjustments, aiming to maintain sustainable property prices. While these restrictions may temper rapid price increases, they also ensure a more stable housing market in the long term.
Major financial institutions have provided varying forecasts for the OCR in 2025:
ANZ Bank’s Quarterly Economic Outlook (2025) predicts the OCR to drop to 3.00% towards the second half of 2025.
Meanwhile, the Interest Rate Research Report (2025) by BNZ Bank forecasts the OCR to fall to a low of 2.75% by the end of 2025.
ASB Bank, in their Economic Forecast Update (2025), forecasts the OCR to drop to 3.25% in May, possibly falling to 3.10% towards the latter part of 2025.
The recent OCR cut by the RBNZ is a strategic move to stimulate economic activity and support the housing market. Lower mortgage rates are expected to improve affordability and encourage both buyers and investors to re-engage with the market. However, the overall impact will depend on various factors, including how banks adjust their lending rates, regulatory measures, and broader economic conditions. While the housing market shows signs of recovery, stakeholders should remain vigilant and consider both opportunities and risks in this evolving landscape.
The NZ Mobile Mortgages team is ready to help you understand the impact of the OCR rate on your mortgage and the steps you need to take towards obtaining financial freedom. Feel free to reach out to us at 021 300 284 for a chat.