Pre-election pause on OCR increases

Following the Reserve Bank’s (RBNZ) announcement yesterday Wednesday 28th of October that it was leaving the Official Cash Rate (OCR) unchanged at 2.75%, I thought you’d be interested in knowing what impact I see this having now on mortgage rates and property prices.

It's clear the OCR will need to be increased on the 9th of December because of rising inflation (the RBNZ has all but confirmed this) so it makes very little sense for the Reserve Bank not to be making an increase now in October. The committee was essentially split down the middle with 4 members in favour of leaving the OCR unchanged while 3 voted for an increase.

The big picture here for Kiwi borrowers is that the longer inflation remains outside of the target set by the government the longer fixed mortgage rates will need to remain higher. Much better then to get this next OCR increase out of the way now. We seem in this country to be constantly prolonging periods of higher interest rates unnecessarily when in many instances quick decisive action by policy makers would prevent this from happening.

Mortgage rates the last few months have been relatively stable albeit we have seen small increases made across most of the available fixed terms. With the strong likelihood of an OCR increase in December, I would expect the banks to increase their advertised rates in advance of the 9th of December decision date. Based on the expected trajectory of where inflation is heading, I would still encourage the majority of borrowers at present to be fixing their loan repayments for at least 2 or 3 years if it’s appropriate for their own circumstances. As mentioned previously, we're now well past the low point for mortgage rates in this current interest rate cycle. There are still some growth threats to the economy, but inflation concerns remain significant as well.

If we look at the housing market buyer demand has faded as the year has progressed, with sales volumes trending down across all regions and average nationwide house prices inching lower. As of September 2026, New Zealand’s median house price was now $755,000. Rising interest rates appear to be the main driver of the slowdown, though uncertainty about the election and the broader economic outlook has also contributed. Petrol prices were 24.3% higher in September than a year earlier, while diesel had soared 55.8%. Cost of living pressures remain central to anyone considering a house purchase. For most people who buy a home, a mortgage represents the single largest debt they will take on in their lives. Understandably many buyers are being cautious and vendors are feeling this now based on attendance records at open homes and the offers been made.

Based on the downward direction of house prices in key cities like Wellington and Auckland anyone considering a house purchase with only a 5 percent deposit would be wise to reconsider as I don’t believe we are at the bottom of the market yet. Those parts of New Zealand currently reliant on public service jobs to drive and sustain property values should be very conscious of what a 2nd term National led government is proposing publicly. Likewise, a Labour led government’s planned introduction of a capital gains tax could see many investors potentially unloading their properties before the 1st of July 2027 which would also add further downward pressure on house prices, particularly in the Capital. As I said to a customer earlier this week while it’s good to be optimistic you must also acknowledge the reality of where things are currently when it comes to house prices in New Zealand.

Please let me know if you would like to discuss the current mortgage rate that you are on with your bank or are needing assistance with finance to purchase a new property or to refinance.

Kind Regards

Simon