The Reserve Bank Of NZ Holds OCR At 5.5%, Signalling Likely Peak In Interest Rates

The Reserve Bank of New Zealand (RBNZ) has kept the Official Cash Rate (OCR) steady at 5.5%, indicating a likely peak in interest rates.

This decision, aligns with previous RBNZ forecasts, which suggested that RBNZ would hold the OCR steady.

‘If the Reserve Bank stays its course, the next movement in the OCR may be downwards,’ says Ed McKnight, Economist at Opes Partners.

‘This suggests a likely peak in mortgage interest rates, even though some banks have recently increased their short term 1-year interest rates.’

However, some interest rates are already falling, reports McKnight, ‘Over the last 6 months the average 5 year mortgage interest rate has fallen from about 7% to 6.4%. And over that same period the 1 year interest rate has done the opposite, moving from 6.4%, up to 7%.’

‘As interest rates peak and eventually fall, more New Zealanders will engage with the housing market which will contribute to the end of the housing market downturn.’

New data released this morning saw net migration increase again. Over the last 12 months, 77,810 more people moved to New Zealand compared to those who left — about 181,000 moved to New Zealand over that period, while 103,000 people left.

‘The bulk of those 181,000 will likely settle in Auckland,’ says Andrew Nicol, Managing Director of Opes Partners.

‘This will increase demand for housing driving up rents. This net migration combined with peaking interest rates will contribute to Auckland ending its house price downturn after house prices dropped by 23% drop since November 2021.’

‘This will have a positive impact on the property climate. We expect to see buyers coming out of the woodwork.’

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