OCR pause expected to steady housing market
Wednesday, 27 May 2026
While the OCR might not have moved from its current 2.25% rate after the Reserve Bank’s announcement, it’s what comes next that property market experts are watching.
The Reserve Bank announced a hold but it came as a split decision. And raises the question of what will happen in the next round, only six weeks away.
LJ Hooker head of research Mat Tiller said the hold felt like the right outcome for the market right now with the property market still relatively soft and activity still below normal levels.
“We still need more buyers back in the market. Holding rates steady should help support confidence and avoid placing additional pressure on households at a time when buyers are already becoming more selective.”
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While the decision itself was widely expected, Tiller says the bigger story now shifted to what comes next. Markets have largely moved on from asking whether rates have peaked and are increasingly focused on when a move higher could arrive.
“Importantly though, the sales story is softer than the headline numbers suggest. REINZ also highlighted that sales activity remains close to the long term April average, which suggests the market is slowing rather than weakening sharply. To me, this feels like buyers are still there, they are simply taking more time and becoming more price conscious.”
“The market needs more buyers back before activity can meaningfully improve.”
Loan Market adviser Logan Reardon said while the market was relatively slow moving there were lots of opportunities for first home buyers in particular.
“Uncertainty about the long-term economic impact of soaring fuel prices might be the reason more Kiwis are opting for longer-term fixed rates. “
He said more than 50% of new lending is currently fixed for more than 12 months.
Despite this, 58% of existing fixed mortgages were due to expire - requiring a reprice or refinance - in the next 12 months.
Reardon said the banks anticipated a future increase in the OCR so the long term interest rates had been creeping up - making those loans potentially less appealing.
Cotality NZ chief property economist Kelvin Davidson said growing numbers of mortgage holders were set to face higher financing costs over the next six to 12 months, after a previous period where they got used to lower rates at each fixed loan roll-over.
New analysis from Cotality NZ showed borrowers who benefited from falling mortgage rates and short-term fixing strategies over the past two years or so were entering a more difficult financing environment as market interest rates rise.
He said this was likely to happen even with the OCR on hold.
And the slowdown is not just the property market - senior economist at ASB Kim Mundy said the Middle East conflict was spreading economic fallout far beyond the fuel pump with supply chain costs rising and household spending expected to come under more pressure.
“While the immediate effect has been higher fuel prices, that’s only one piece of the puzzle. The broader story is how the entire cost shock (which includes fertiliser and petrochemicals) spreads through supply chains, lifting the cost of manufactured goods, packaging, freight and farm inputs, and the flow on effects of that to consumer spending,.”
Realestate.co.nz’s Vanessa Williams said the hold was exactly what New Zealand needed right now with so much uncertainty in other areas.
She said so much could change so quickly in the geopolitical landscape that this was positive to help keep the market steady.