Lower OCR seen lifting housing demand and giving SMEs breathing room
New Zealand’s latest rate cut is being welcomed across the mortgage and SME sectors, with lenders and economists saying the move to a 2.25% official cash rate (OCR) should ease pressure on households and give small businesses vital “breathing room” – even as the Reserve Bank maintains a cautious, data-dependent stance.
‘Welcome relief’ for borrowers ahead of holiday spending
Finsure NZ country manager Jenny Campbell (pictured upper left) said the 25-basis-point cut will land at a crucial time for stretched households.
“The rate cut will give Kiwis some relief ahead of an expensive holiday season,” Campbell said.
She expects the decision – and the prospect of further easing in 2026 – to help both the housing market and the wider economy.
“I’m hopeful that a retail boom over the festive season will further alleviate some of the unemployment pressures and build positive economic momentum into the new year," Campbell said.
“NZ banks are gearing up for a very busy lending season, with two major banks offering unprecedented cash contributions for new lending, indicating that this might be the start of some competitive offerings from banks.
“Accordingly, advisers should also be thinking about how they can best support the small businesses across New Zealand as the economy picks up, and we emerge from some slow years.”
For advisers, Campbell’s message is clear: prepare for higher enquiry volumes and sharpen retention strategies as bank offers ramp up.
Housing momentum builds as serviceability improves
LJ Hooker head of research Mathew Tiller (pictured upper center) said the cut confirms monetary policy has moved “firmly into support mode” as the Reserve Bank responds to below-trend growth and easing price pressures.
“Household demand is patchy, hiring is cautious and unemployment has lifted, all signs of spare capacity in the system,” Tiller said.
“With inflation easing and expectations anchored, the bank had room for a modest cut without reigniting price pressures.”
He noted that the housing market is already showing early-cycle improvement.
“Sales are higher than a year ago and days on market are beginning to shorten," Tiller said. "This cut will sharpen borrowing costs at the margin and help consolidate recent price gains, especially in markets rebounding from lower bases.”
Rental conditions are also shifting in favour of would-be buyers.
“More stock and flatter rents are giving long-term renters the confidence to consider homeownership, especially with improving serviceability,” Tiller said, adding that “with the OCR now at 2.25%, we expect rates to settle a little lower, supporting a solid lift in activity through 2026.”
LJ Hooker head of operations NZ Allaine Burkett (pictured upper right) said the rate move reinforces an upswing that was already underway.
“We’ve seen people returning to the market over the past quarter, and this decision reinforces that positive sentiment,” Burkett said.
Cotality data shows first-home buyers made up 27.7% of all purchases last quarter, rising to 36% in Wellington, with average repayments down roughly $485 a month, putting ownership within reach for a wider cohort. Burkett said that sits alongside more balanced conditions on the listings side.
“With 33,588 homes listed in October, up nearly 4% on last year according to realestate.co.nz, buyers have more choice and sellers have more realistic expectations. It’s a better environment for decision-making.”
She expects the 1 December easing of LVR settings – particularly for high-LVR owner-occupier lending – to further support credit-worthy borrowers who have income but smaller deposits.
“The combination of falling rates, stable prices, and more flexible lending has created the most favourable environment in years.
“Activity is broadening, confidence is returning and buyers feel they can move with clarity.”
SMEs gain ‘breathing room’ – and a call to brokers
Non-bank lender Prospa says the rate decision is also critical for small businesses that lean on both personal and commercial borrowing.
“We welcome the recent rate cuts. It allows SMEs the breathing room they need to plan with confidence," Managing director NZ Adrienne Begbie (pictured lower left) said. "Lower borrowing costs enable SMEs to access capital more affordably, improving cash flow for operations and growth.”
Begbie added that the move is about more than just cheaper debt.
“Moreover, rate cuts signal stability in a pressured economy; improved confidence often leads to increased spending, benefiting all sectors," she said. "While challenges persist, this move by the Reserve Bank demonstrates a commitment to supporting resilience and job creation for SMEs. It’s about unlocking flexibility and optimism when they need it most.”
Begbie noted many owners still rely heavily on their own finances or home equity.
“At Prospa, we know many small business owners lean on personal funds or home equity to keep things moving," she said. "A rate cut can make a real difference – it eases mortgage repayments at home and lowers borrowing costs for the business. That can free up hundreds of dollars each month, giving owners the chance to move beyond ‘business as usual’ and invest in their team, stock, or systems.”
Begbie said this environment creates a window for brokers to have more proactive conversations about non-bank solutions.
“Lower rates don’t just mean cheaper finance – they create opportunities for Kiwi SMEs," the Prospa leader said. "When consumer confidence rises, spending follows, which is critical for sectors like retail and hospitality. And, this is the perfect time for brokers to have proactive conversations about funding solutions that help clients scale and meet demand.”
Economists: Cautious cut, neutral bias from RBNZ
Bank economists say the cut was widely expected, but the tone of the Monetary Policy Statement was more cautious than some had anticipated.
ASB chief economist Nick Tuffley (pictured lower center) and senior economist Mark Smith said: “Although the RBNZ cut by the amount widely expected, the record of meeting shows the RBNZ was more cautious than many will have anticipated.”
They noted the committee weighed up holding the OCR at 2.5% before opting for a 5–1 vote to cut, effectively “buying extra insurance for an ‘enduring’ recovery”. The new rate track bottoms out at 2.2%, implying some chance of another move if growth underperforms, but less easing than markets had priced going in.
Westpac NZ chief economist Kelly Eckhold (pictured lower right) also highlighted the Bank’s more neutral stance.
“As widely expected, the RBNZ cut the OCR by 25bps to 2.25%,” he said, adding that “the general tone of the Monetary Policy Statement seems more neutral than we expected.”
Westpac expects 2.25% to mark the low point of the cycle.
“We continue to expect 2.25% to mark the nadir of the easing cycle,” Eckhold said, with future moves hinging on how quickly spare capacity is absorbed and inflation returns toward 2%.
For mortgage advisers, the message from economists is that OCR cuts are likely nearing their floor, but the full impact on household cash flow, SME confidence, and housing demand is still working through the system – setting up a more active, but still data-sensitive, 2026.
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