Official Cash Rate decision live updates: Reserve Bank cuts rates by 50 basis points to 4.75%
The Reserve Bank has today cut the Official Cash Rate (OCR) by 50 basis points (bps) to 4.75%.
The Monetary Policy Committee said economic activity in New Zealand was subdued, in part due to restrictive monetary policy.
“Business investment and consumer spending have been weak, and employment conditions continue to soften. Low productivity growth is also constraining activity.”
The committee said that annual consumer price inflation was within its 1% to 3% inflation target range and converging on the 2% midpoint.
The Reserve Bank (RBNZ) was tight-lipped about any future moves from here. The committee confirmed that future changes to the OCR “would depend on its evolving assessment of the economy”.
Committee members agreed that an OCR of 4.75% was still restrictive and left monetary policy well-placed to deal with any near-term surprises.
In the minutes following the release, the New Zealand dollar fell to US61.07c from US61.30c beforehand.
The local NZX50 stock market also rose on the news.
Finance Minister Nicola Willis said today’s official cash rate decision was “fantastic news”.
“Double whammy, double happy,” she said.
Willis said it was a sign inflation was coming under control which was what was needed to take control of the cost-of-living crisis.
STORY CONTINUES AFTER THE LIVE BLOG
Westpac reduces floating rates for home loan customers, business and agribusiness lending rates
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Westpac NZ is passing on today’s official cash rate reduction by the full 0.50% to floating rates for home loan customers, and also decreasing business and agribusiness lending rates.
The bank is also cutting fixed home lending rates by 0.10% p.a., which means it has now reduced its advertised 12-month home loan interest rate by a total of 0.95% p.a. since the start of July.
Westpac is also reducing savings rates along with some of its term deposit rates.
Westpac NZ General Manager of Product, Sustainability and Marketing Sarah Hearn says the bank is working hard to offer good value in a highly-competitive environment.
“Today’s OCR announcement is good news for housing, business and agri borrowers. We’re responding and passing on the benefits in a timely manner,” Hearn says.
“We’re also reducing our home loan serviceability rate to 8.15% to support New Zealanders looking to get on the housing ladder, while ensuring we continue to lend responsibly.
“We’re pleased to be delivering another rate cut for our home loan customers, and confidence boost we expect this will provide to households and small businesses. Westpac’s economists estimate that nearly half of all homeowners on fixed rates will have rolled onto lower rates by the end of the year.
“At the same time, we know many households are still facing cost pressures, while our savings customers will be watching falling interest rates closely.
“We continue to proactively contact home loan customers who may be facing into financial difficulty, and we encourage anyone who’s concerned about their financial situation to get in touch.”
Retail NZ hopes rate cut brings Christmas cheer
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Today’s cut in the Official Cash Rate is an early Christmas present for the retail sector, according to Retail NZ.
“We are delighted at the Reserve Bank’s decision to cut the OCR by 50 basis points to 4.75%,” Retail NZ Chief Executive Carolyn Young says.
“Coming at the beginning of Q4, this will be welcome news for retailers as they prepare to enter the period that is traditionally the busiest time of year for retail sales. Strong pre-Christmas sales are critical to retailers meeting their annual sales targets.”
Retail NZ is hopeful that today’s OCR announcement will turn around consumer confidence, which has been at prolonged low levels over the last couple of years. Improved confidence will help retailers, who have been suffering a continued downturn in sales.
OCR drop 'will free up more cash for many'
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"Around half of mortgage borrowing is now fixed or floating for six months or less," Finance Minister Nicola Willis said.
"That is the largest amount since records began in 2017."
"What that means is a lot of people will have the opportunity in the next few months to switch to a lower interest rate, meaning that will free up more cash for many, and that cash will flow into the tills of local business and make a difference to our economy," Willis said.
Supersized cut benefits buyers and sellers alike
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Home buyers today are in a unique position considering the trajectory of house prices since the peak, says Daniel Coulson, Chief Executive Ray White New Zealand.
They are presented with the opportunity to buy a home at today's price, but lock in the benefit of tomorrow’s interest rate. This opportunity only comes around once in a cycle and as buyers weigh up both the purchase price and the ongoing cost of ownership through borrowing, very rarely are purchasers presented with a win-win.
Sellers on the other hand can take a great deal of confidence in today's announcement as well. The last cut in August saw a spike in inquiry, inspections and auction participation, the reaction to this cut is likely to be the same, Coulson says.
Today's significant OCR cut will help rental market - NZPIF
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"Today's 50 basis point interest rate cut is another sign that there are better times ahead for both property investors and renters," said Matt Ball, spokesperson for the NZ Property Investors' Federation.
“To be clear, a lower cash rate today doesn’t mean rent cuts tomorrow – that's not how things work. Many of our members are on fixed rate mortgages so it will take time for the OCR cut to filter through.
“However, lower interest rates and the changes the Government is making to the rental sector will make it more attractive for people to invest in it. This will increase the supply of rental property, and increased supply will give renters more choice at a better price.
“We are starting to see signs of investors getting ready to get back into the market.
"Interest rates are falling, banks are keener to lend, interest deductibility is returning, and positive changes are being made to the Residential Tenancies Act, so there's a better environment for people wanting to get into the business of providing rental accommodation.
“There are still bargains to be had in the property market, particularly for investors ready to put in the hard work and add value to their investment by renovating the properties they buy.
“On the downside, other costs like rates, insurance and maintenance are still high, it’s a tenant's market and rents are static, so anyone getting into the business must ensure the numbers add up.
“We get the feeling that cashed-up investors will be first off the block, while newer investors, who are more reliant on borrowing, may wait for interest rates to fall further.
“It's looking like 2025 could be the year when things really start to pick up,” he said.
Nicola Willis says 'we're seeing green shoots'
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On growing unemployment and scores of business closing, Willis said the coalition government had "always been up front" and had inherited an "economy in trouble."
Willis said there had been many years of a cost of living crisis and inflation out of control.
Now we were seeing green shoots, she said.
"I think this is going to have a very quick impact on New Zealand mortgage holders.
Latest OCR rate will 'help boost confidence' - Finance Minister
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Speaking to reporters this afternoon, Finance Minister Nicola Willis said today's official cash rate decision was "fantastic news."
"Double whammy, double happy," she quipped.
Willis said it was a sign inflation was coming under control which was what was need to take control of the cost-of-living crisis.
"With inflation under control, interest rates can come down and that is going to make it cheaper for mortgage holders, businesses investing, for anyone who has got borrowing. This is good news for economy. It will help boost confidence."
ANZ cuts interest rates for business and agri customers, floating home loan and savings accounts
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ANZ Bank New Zealand has announced cuts to its floating business and floating home loan interest rates following the decision by the Reserve Bank of New Zealand to cut the Official Cash Rate by 50-basis points.
The full 50-basis point cut has been passed on to ANZ NZ’s Business Floating loan and Business Overdraft base rates.
ANZ NZ Managing Director for Business and Agri, Lorraine Mapu, said: “While consumer and business confidence is improving, it remains a very challenging economic environment and the effects of high inflation and interest rates are still being felt.”
“Today’s move by the Reserve Bank to drop the OCR to 4.75% will be welcome news to many of our customers.”
Mapu said most of ANZ NZ’s business and agri customers were on floating rates so the changes should flow through to them relatively quickly, giving some debt relief and helping with cashflow.
“Since interest rates started to drop – both wholesale and more recently the OCR by a total of 75-basis points – we have announced 80-basis points in cuts to our business and agri customers.
“We hope this provides some relief to Kiwi farms and businesses that have been doing it tough in the current environment,” Ms Mapu said.
ANZ NZ has also passed through the full OCR cut to its Floating and Flexible home loan rates, taking them to 7.89% and 8% respectively.
ANZ NZ Managing Director for Personal, Grant Knuckey, said while they made up a small portion of ANZ NZ’s home lending, homeowners who have floating rate loans would be the first to feel the benefits of the falling OCR.
“Passing on the full 50-basis points cut will immediately benefit homeowners who have all or part of their loans on floating rates.” Interest rates will continue to be reviewed in response to international and local market conditions.
“As the overall interest rate environment heads down, customers who are due to refinance their fixed-term loans over the coming months will see their interest costs come down too,” Knuckey said.
“We’ll always endeavour to provide the best rates for our customers. As people navigate the changing interest rate environment we encourage our home loan customers to connect with the bank to ensure they are aware of all the options available to them.”
Knuckey said when reviewing interest rates, the bank considered a range of factors, including the OCR and changes in wholesale interest rates and the need to balance the needs of borrowers and savers.
In response to the drop in the OCR, ANZ NZ will decrease the Serious Saver rate by 50-basis points, taking it to 3.75%. Online Call and Business Premium Call will also drop by 50-basis points to 2%. The new rates will be effective from the following dates:
- Business Floating base interest rate: New loans 15 October 2024, existing loans 22 October 2024
- Business Overdraft base interest rate: 22 October 2024
- ANZ Floating Home Loan interest rate: New loans 15 October 2024, existing loans 22 October 2024
- ANZ Flexible Home Loan interest rate: 15 October 2024
- Serious Saver interest rate: 1 November 2024
- Online Call and Business Premium Call: 22 October 2024
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Drop in interest rates already impacting property market - LJ Hooker
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LJ Hooker group head of Network NZ Campbell Dunoon welcomed the move, noting that the reduction in interest rates is already positively impacting the property market.
"With two consecutive rate cuts, we’re seeing a significant uplift in buyer activity and confidence. More people are attending open homes, and there has been a noticeable increase in auction participation across the country," Dunoon said.
Dunoon added that while buyer interest is rising, it has not yet resulted in substantial changes in property prices. According to the latest CoreLogic data, property prices remain relatively stable, with the median house price down by just 0.5 percent in September compared to a year ago.
"This stability suggests that, while more people are ready to make purchasing decisions, the market is still benefitting from balanced conditions that are essential for sustainable growth. The stability in property prices and reduced interest rates create better opportunities for first home buyers wanting to enter the market," he said.
"These rate cuts have provided much-needed relief for borrowers, making homeownership more accessible and giving those on the fence the confidence to take action," Dunoon said.
Dunoon noted that lower interest rates could also benefit property developers, helping to add more housing to the market.
"While the property and rental markets are currently stable, changes in economic conditions and a growing population could lead to a shortage of stock. Stats NZ data shows that only 33,632 new homes were consented in the year to the end of August 2024, a 20 percent decrease compared to the previous year," he said.
"With the reduction in the bright-line test, decreasing mortgage rates, and the government's new support programme for residential construction, developers are likely to be more motivated to invest in new builds, helping to grow our housing stock.
With today’s RBNZ decision, Dunoon expects to see improvements to the property market.
"We expect that the combination of improving economic indicators, steady property prices, and lower borrowing costs will continue to provide opportunities for buyers and sellers alike, fostering a positive outlook for the property market as we move into the warmer months."
NZ Dollar falls after OCR announcement
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In the minutes following the release, the New Zealand dollar fell to US61.07c from US61.30c beforehand.
'Brighter days ahead' says Finance Minister Nicola Willis
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Today’s cut in the Official Cash Rate (OCR) to 4.75% is welcome news for families and businesses, Finance Minister Nicola Willis says.
“Lower interest rates will provide much-needed relief for households and businesses, allowing families to keep more of their hard-earned money and increasing the opportunities for businesses to invest and innovate.
“New Zealanders have been doing it tough over the last few years with the economy in recession, high interest rates and sharply rising prices.
“That is changing as inflation falls towards the target level, interest rates come down and businesses have the confidence to invest and hire again.
“Last week’s ANZ Business Outlook showed that businesses are feeling more positive and looking to invest in the future which is good news for all Kiwis. The Mood of the Boardroom echoed this, showing that confidence in the economy has reached its highest level since 2016.
“It’s early days and there is still more work to do, but our careful and deliberate plan to rebuild the economy is working. Like businesses, we are confident that brighter days are ahead,” Nicola Willis says.
BNZ cuts variable home loan rates by 0.50%, customers to benefit from tomorrow
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BNZ is making changes to its variable home loan rates, passing on the full OCR cut of 0.50%.BNZ General Manager Home Lending Products James Leydon says today’s decision by the Reserve Bank to cut to the official cash rate and BNZ’s subsequent interest rate reduction will be welcome news for many New Zealand households.
“We are continually assessing our interest rates and looking for opportunities to pass on rate reductions to our customers. Customers will benefit from our latest variable rate change which is effective from tomorrow.
“BNZ will continue to move quickly in response to changes in external factors, including the Official Cash Rate and wholesale interest rates, to ensure we’re passing rate changes on to our customers as quickly possible,” says Leydon.
BNZ’s new variable home loan rates are effective from 10 October 2024.
ASB drops interest rates for personal, business and rural lending
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ASB is dropping interest rates across personal, business and rural lending following today’s decision by the RBNZ to decrease the Official Cash Rate (OCR) by 0.50%. The move comes hours after ASB lowered its fixed mortgage rates across several popular terms.
ASB’s variable home loan rate will fall by 50 basis points from 8.39% to 7.89%, while the Orbit rate drops from 8.49% to 7.99%. ASB’s Business and Rural Floating Base Rate is moving from 6.69% to 6.19%.
ASB’s Executive General Manager Personal Banking Adam Boyd says “We’re pleased to be announcing substantial cuts to our floating home loans, as well as our business and rural rates, in response to the OCR decrease. The various rate reductions we’ve announced today will impact more than 120,000 customers and we hope this will take some pressure off our customers. We do expect this downward OCR trend to continue into 2025 which will provide further relief.”
The OCR decrease is also being passed on to some of ASB’s savings rates. Savings On Call will move from 2.65% to 2.15% while ASB’s youth account, Headstart will shift from 4.75% to 4.15%.
David Seymour: 'Latest twist of a nauseating three-year fiscal and monetary roller coaster'
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This afternoon, the Reserve Bank made another cut to the Official Cash Rate, from 5.25% down to 4.75%.
ACT Leader David Seymour responds:
“Today’s rate cut is great news. Lower interest rates mean real relief for Kiwis with mortgages, also relieving pressure on rents, and freeing up spending cash to quench thirsty local businesses.
“However, on the Reserve Bank’s part, a 50 basis-point cut is a multi-billion dollar mea culpa, and the latest twist of a nauseating three-year fiscal and monetary roller coaster.
“Today’s cut bookends a series of excesses. The too-easy money of Covid times spiked house prices and inflation. Then, interest rates shot up, house prices crashed back down. Today, Kiwis are finally getting off a three-year fiscal and monetary rollercoaster, feeling nauseous for their troubles.
“Kiwis have done the responsible thing. Interest rates were also driven up by Labour’s Covid spending blowout. Households responded by making spending sacrifices – and changing the government.
“Our efforts are paying off. Together, our prudent spending has seen inflation ease back and given the Reserve Bank room to cut interest rates. If we stay the course, we should expect further relief in the coming months.
“However, interest rates are still painfully high compared with pre-Covid times. ACT is determined to speed the path back to lower rates, lower living costs, and real economic growth.
“We must build on our progress in cutting the waste and red tape from Wellington. That is how we honour the efforts of households working to secure a prosperous future for themselves.”
'Double-whammy, double-happy': Finance Minister reacts to OCR announcement
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"It's clear the economy is turning a corner and brighter days are ahead," Finance Minister Nicola Willis said.
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The RBNZ was tight-lipped about any future moves from here. The Committee confirmed that future changes to the OCR "would depend on its evolving assessment of the economy".
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The Committee said that annual consumer price inflation was within its 1 to 3% inflation target range and converging on the 2% midpoint.
Committee members agreed that an OCR of 4.75% was still restrictive and left monetary policy well-placed to deal with any near-term surprises.
Employment conditions 'continue to soften'
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The Monetary Policy Committee said economic activity in New Zealand was subdued, in part due to restrictive monetary policy. "Business investment and consumer spending have been weak, and employment conditions continue to soften. Low productivity growth is also constraining activity."
Reserve Bank’s bold OCR move: Cut by 50 basis points to 4.75% - mortgage relief in sight for homeowners
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The Reserve Bank has cut the Official Cash Rate (OCR) by 50 basis points, to 4.75%.
Major bank cuts rates ahead of OCR decision
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The bank made the cuts ahead of the Reserve Bank’s Official Cash Rate announcement, which is expected at 2pm today.
📈 Interest rate tracker
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The OCR is a key component in what banks charge people with a mortgage and the saving rates offered to those with money in the bank.
Click here to see the latest on what these rates are with our interest rate tracker.
OCR announcement at 2pm today
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Hello and welcome to our blog on the Official Cash Rate call from the Reserve Bank.
Governor Adrian Orr will release the RBNZ's call at 2pm.
STORY CONTINUES
ASB chief economist Nick Tuffley noted the RBNZ’s caution, on the outlook and said a further 50bps in November was “not a done deal”.
“The weakness of data through into early next year will influence how long the RBNZ keeps cutting in 50bps moves,” he said. “However, we see the risk being that data will come in on the softer side of RBNZ expectations.”
Abhijit Surya, at Capital Economics, said the RBNZ was likely to hand down a couple more 50bps rate cuts over the next few months.
“We think it will end up cutting rates more aggressively than most are predicting,” he said.
“We suspect the Bank will hand down 50bps cuts at each of its next two meetings. Moreover, looking further ahead, we expect the RBNZ to cut its OCR to a trough of 2.25% by end-2025, which is markedly below the 3.00% terminal rate predicted by the analyst consensus.”
EARLIER
With all the major bank economists picking a 50-basis-point cut to the Official Cash Rate today at 2pm, expectations are running high that the Reserve Bank will deliver some significant relief for struggling business borrowers and mortgage holders.
However, although economists were unanimous in their 50bps picks over a cut of 25bps, they also stressed that this would still be a line-ball call for Governor Adrian Orr and the Monetary Policy Committee.
“We discussed flipping a coin,” says ANZ chief economist Sharon Zollner.
“It’s going to be a close-run thing, but now that most economists are calling it and the market is pretty much fully pricing it, one has to conclude that on balance the likeliest scenario is that the RBNZ will just take what’s on the table and cut the OCR 50bps to 4.75% next week,” she said.
ASB chief economist Nick Tuffley was more emphatic in his expectation of a 50bps cut this week but conceded it was not a done deal.
“It requires the RBNZ to heavily weight the NZIER’s Quarterly Survey of Business Opinion (QSBO) results,” he said. “Evidence of the need to step up the pace of cuts is likely to be stronger by November after inflation and labour market data are out.”
But ASB economists still shifted their call to 50bps after getting increasingly concerned “by just how tight monetary conditions are, and how long they would remain restrictive if the RBNZ took a measured approach to easing”.
“Inflation pressures look set to shrink very soon. The QSBO suggested that the deterioration of the labour market has picked up steam and that pricing pressures have weakened considerably. It is a warning signal that inflation risks undershooting the 2% mid-point of the inflation target band,” Tuffley said.
In contrast, the risk of high inflation proving to be sticky was much diminished, he said.
ASB expects the OCR will be down to 4% by February 2025 and will reach a terminal rate of 3.25% from around mid-2025.
Today’s review is different to the full Monetary Policy Statement we got in August. It means we’ll just get a one-page release with no press conference and no fresh forecasts. But you can still bet that every word of the release will be pored over for clues to the outlook.
BNZ head of research Stephen Toplis also described the decision as a “line-ball call” but opted for 50bps.
“There is a growing body of evidence that says annual inflation could soon fall below the 2% midpoint of the Reserve Bank’s target band,” Toplis said.
BNZ is forecasting it to be 2% by March 2025, falling to 1.7% by December 2025.
“The balance of risk is increasingly to the downside,” Toplis said.
Westpac chief economist Kelly Eckhold (also picking 50bps) said the challenge for the RBNZ would now be to maintain firmer control “on the market’s tendency to extrapolate OCR cutting expectations”.
“Moving the OCR closer to neutral will help with that goal. But we also hope the RBNZ will provide a clearer set of parameters on how they would expect to operate policy in 2025,” he said.
Kiwibank economists noted market traders and economists had now all positioned for “chunky” 50bps rate cuts.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up for his weekly newsletter, click on your user profile at nzherald.co.nz and select “My newsletters”. For a step-by-step guide, click here.