Resetting the mortgage clock
Will repricing unlock a spring surge?
After months of stagnant sales and flat prices, New Zealand’ s residential property market stands at a critical juncture.
The Reserve Bank’ s( RBNZ’ s) 225 basis point cut to the Official Cash Rate( OCR) over the past year has sparked optimism in financial markets, boosted business sentiment, and gradually lowered mortgage rates. But for households, the benefits have been slower to materialise, and for many, barely perceptible at all.
Now, as winter gives way to spring and fixed-rate mortgage repricing begins in earnest, the question is whether these lower rates will be enough to reignite residential sales activity.
While the answer depends on a range of complex factors, from labour market conditions to consumer sentiment, there is growing evidence that the gears are shifting.
THE LONG LAG OF MONETARY POLICY
To understand what happens next, it’ s important to recognise just how delayed the effects of monetary policy can be. Financial market commentators estimate that it takes more than 12 months for interest rate cuts to filter through the economy. The RBNZ began easing policy last August – which means the full economic impact is only now bubbling to the surface.
Business confidence has already responded, buoyed in part by a strong export sector and easing input costs. But households, especially those without mortgage debt, have felt little improvement.
According to BNZ economists, net household incomes have fallen despite lower interest rates, largely due to reduced returns on savings and term deposits. For retirees and savers, rate cuts don’ t feel like relief; they feel like erosion.
HOUSING INERTIA
One of the most visible signs of New Zealand’ s slow economic recovery is the property market’ s inertia. Real estate prices have stabilised but show little sign of upward momentum.
Recent data from property analytics and data platform Cotality shows values rose just 0.2 per cent in June, which is hardly the kind of movement that inspires urgency among buyers or confidence among sellers.
This stability is partly by design. Housing Minister Chris Bishop has been clear that the government aims to decouple economic growth from rising house prices, a shift in doctrine that challenges long-held assumptions.
“ Destroying the idea that the New Zealand economy should just be based on house price growth is a fundamental formula this government is trying to embed,” he said in July.
It’ s a sentiment shared by policymakers at the RBNZ, who are now armed with tools to restrain credit growth and prevent excessive leverage. These include limits on debt-to-income ratios( DTIs) and loanto-value restrictions( LVRs) – a clear signal that any recovery in the housing market is expected to be slow, steady and broadly sustainable.
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