Chief Property Economist Kelvin Davidson unpacks the April cash rate decision and Monetary Policy Statement, and what it means for the housing market.
As widely expected, the Reserve Bank’s Monetary Policy Committee (MPC) cut the official cash rate today by 0.25%, taking it to 3.5%. The decision reflected the fact that inflation remains well within the target band and that the economy is still subdued.
Today’s release was an ‘interim’ Monetary Policy Review rather than a full Statement,which means we don’t get the updated economic forecasts and detailed analysis. But the MPC’s commentary today still took the time to discuss tariffs and possible effects.
In a nutshell, uncertainty remains high, but the central view right now is that inflation effects are not clear-cut; a weaker NZ$ could raise imported inflation, but a diversion of goods away from the US and towards NZ by large global exporters could work in the opposite direction.
Then in regard to NZ’s economic growth itself, the general tone of the commentary is that it’s likely to be slower than in a world without tariffs. As such, the MPC noted they have scope to lower the OCR further as appropriate and as the effects of tariffs become clearer.
In other words, NZ’s interest rate environment still has a ‘downward bias’ and it’ll be interesting to see what happens to mortgage rates in the coming weeks. The next OCR decision is 28 May, and prior to that we’ll have had a bit more information in the form of Q1’s CPI data (17 April) and labour market figures (7 May).
For the property market and mortgage borrowers, ‘uncertainty’ is also a buzzword. February’s Reserve Bank lending data shows that borrowers continue to hedge their bets, with floating debt still popular (41% of loans) but fixed terms of longer than 12 months also coming back into focus. At 20% of activity in February, fixes of greater than 12 months were the most popular they have been since July last year.
For now, tariff-uncertainty aside, our expectation is a subdued upturn for the property market in 2025, with sales volumes and house prices rising slowly. For individual borrowers, it will mean finding a balance between securing the best/lowest mortgage rate but also weighing up the certainty that a longer-term fixed loan can offer.
Meet Kelvin Davidson
Chief Economist
Kelvin joined CoreLogic in March 2018 as Senior Research Analyst, before moving into his current role of Chief Economist. He brings with him a wealth of experience, having spent 15 years working largely in private sector economic consultancies in both New Zealand and the UK.
Full profile