On The Market Update: 20 August 2025
- Staircase Financial
- 18 hours ago
- 4 min read
What the Reserve Bank’s rate cut really means for you and the property market
The Big News: OCR cut to 3.00%
The Reserve Bank of New Zealand (RBNZ) has cut the Official Cash Rate (OCR) by a quarter of a percent, bringing it down to 3.00%. This is the seventh time in the last year that the Bank has reduced the OCR, and the latest drop confirms focus has shifted from fighting inflation to supporting the economy to recover.
The decision was a close call. Four committee members supported the smaller 0.25% move, while two argued for a larger half-percent cut. In other words, the Reserve Bank was debating whether the economy is weak enough to justify bolder action. In the end they went with caution, but they made it clear there’s room to go lower if the data keeps tracking in the right direction.
Why the cut happened
Three big reasons stand out:
Inflation is back under control. At 2.7% in the June quarter, price growth is sitting inside the Bank’s 1–3% target range. Forecasts suggest it could drift closer to 2% over the next year.
The labour market is softening. Unemployment has risen to 5.2%. That means businesses are easing up on hiring and wage pressures are easing too.
Growth has lost steam. The Bank noted “spare capacity” building in the economy. That’s economist-speak for factories, offices, and workers not being fully used, which slows overall momentum.
Put simply: the inflation fight is largely won, but the cost has been slower growth and higher joblessness. That gave the Bank the green light to cut rates.
What it means for mortgage rates
The truth is, most of this cut was already “in the price.” Banks saw it coming and trimmed their rates ahead of time.
One-year specials are now around 4.79% at the main banks.
Two-year sits around 4.89%, and three-year is just under 5%.
Six-month terms hover between 5.09% and 5.14%.
Floating rates will likely come down by 0.25% soon, but they remain much higher than fixed.
For households rolling off older fixed loans of 5.5–6.3%, this is welcome relief. A typical mortgage could be re-fixed about 1% lower, meaning hundreds of dollars less in monthly repayments.
What the Monetary Policy Statement adds
The Monetary Policy Statement (MPS), released alongside the cut, provides more detail about the Bank’s thinking. There are several points here that are particularly encouraging for the property market:
More cuts are possible. The Bank used the phrase “scope to lower further.” They are not promising, but the door is open.
Half of all mortgages will re-fix lower in the next six months. That’s a huge amount of household cash flow being freed up.
House prices are now within the “sustainable” range. In plain terms, the Bank no longer sees them as overheated. That removes some of the political and policy risk that spooked investors during the last boom.
The banking system is stable. Capital buffers are strong, meaning banks can keep lending even if the economy slows further.
All up, it is a friendlier backdrop for property than we have seen in years.
What others are saying
Banks and commentators are already weighing in:
BNZ strategists suggest wholesale “swap rates” could fall below 3%, paving the way for more fixed-rate cuts.
Kiwibank’s economists think the OCR may need to go as low as 2.5% if the slowdown deepens.
A Reuters survey of market watchers sees another cut to 2.75% by early 2026 as the most likely path.
While no one expects a rapid plunge in rates, the consensus is leaning toward more easing ahead.
The housing pulse
Property data from REINZ shows a market that’s stabilising rather than booming. Prices are up slightly on last year, with Auckland inching higher. Sales volumes remain patchy, but that’s normal when buyers are cautious. Regionally, Queenstown is still outperforming while Christchurch is flat.
The RBNZ notes that residential investment (new housing supply) is expected to pick up again after a contraction this year. That’s positive for construction and for investors who like to ride the supply-demand balance.
What this means for investors
For existing borrowers: If you’re coming off higher fixed rates, you’ll feel a genuine drop in repayments. Laddering your lending across short-to-medium terms can keep you flexible if rates drift down further.
For new buyers and investors: Lower rates boost borrowing power slightly, but DTI and LVR rules still cap how far you can stretch.
For floaters: Yes, your floating rate should fall by 0.25%, but fixed remains sharper. Only stick with floating if you need the flexibility to restructure.
Staircase’s view
This cut is not the last, but the Bank is easing gently rather than aggressively.
For investors, that combination of:
rates drifting lower,
household cash flow improving,
valuations back in sustainable territory,
and stable bank funding creates a constructive environment to position for the next upswing.
The key is to stay cycle-aware. Target markets with strong rental demand and limited supply. Use shorter fixes to stay close to the easing cycle. And always let the numbers do the talking
At Staircase, we help investors read these turning points and make confident moves. If you're thinking of your next step, book a free strategy session with our team to get some personalised advice.
