Reserve Bank Cuts OCR to 3%: A Boost for First-Home Buyers

The Reserve Bank of New Zealand (RBNZ) has reduced the Official Cash Rate (OCR) by 25 basis points, bringing it down to 3 percent. This marks the lowest level in three years and reflects a split decision by the bank, which indicates the possibility of further reductions in the future. The move is expected to have significant implications for the property market, particularly for first-home buyers.

Impact on the Property Market

Nathan Miglani, Managing Adviser at Squirrel, welcomed the announcement, describing it as positive news for homebuyers. “This was expected — everyone predicted the OCR to go down,” Miglani stated. He pointed out that the nearly 2 percent drop over the past twelve months is advantageous for potential buyers, as it will lead to lower repayments and improved affordability.

“People will overall feel very positive about the housing market,” he added. Miglani noted that after three to four years of sluggish activity, momentum has begun to return to the market. He advised first-home buyers to act promptly, as the upward trend in the New Zealand housing market is likely to continue.

Economic Outlook and Inflation Expectations

The RBNZ anticipates that annual inflation will reach 3 percent during the September quarter, driven by increases in food, administered, and tradable goods prices. However, the bank expects this inflation spike to be temporary. It predicts that inflation will revert to the 2 percent midpoint as pressures from tradable goods ease and spare capacity helps to stabilize domestic price growth.

Recent data indicates that the economy contracted in the second quarter of 2025, which was weaker than previous forecasts made in May. This slowdown is attributed to various factors, including declining employment, slower wage growth, diminished household savings, and rising costs for essential items such as food, gas, and electricity. The RBNZ also pointed out that global conditions are affecting the economic outlook, with unexpected increases in tariffs on New Zealand exports to the United States complicating matters for some industries.

Despite these challenges, the RBNZ believes that the global economy is generally adjusting in line with expectations, which may help mitigate some of the adverse effects on domestic conditions. As the situation evolves, both policymakers and market participants will be closely monitoring these developments to gauge their impact on New Zealand’s economic landscape.