OCR Cut to 2.25%: What Today’s Decision Means for Borrowers, Investors, and the Market Recovery
- Staircase Financial
- 3 days ago
- 4 min read
As expected the Reserve Bank has today reduced the Official Cash Rate (OCR) by 0.25%, bringing it to 2.25%.
While a modest adjustment, this move reinforces the Bank’s confidence that inflation pressures have eased and that the broader economic recovery can now be supported by lower borrowing costs.
For buyers, homeowners, and investors, the message is clear: financing conditions are moving steadily in your favour, and today’s cut strengthens the shift already taking place across the housing market.
Why Today’s OCR Cut Matters
Mortgage rates will ease further from already reasonably low levels
This latest reduction gives banks scope to fine tune their fixed term pricing downward. Even a small rate improvement can translate into meaningful monthly savings, especially for households refinancing off higher 2023–2024 rates.
Borrowing power increases
Every quarter percentage point reduction in mortgage rates can increase maximum borrowing capacity by 3 to 5%, depending on bank test rates.
That means buyers sitting close to approval thresholds have an improved chance of being approved.
Confidence improves as rate direction becomes clearer
People behave differently when interest rates are falling rather than rising.
The direction of travel matters just as much as the level and now the established trend has been down for a year. That trend is inspiring confidence.
The Market Already Shows Momentum And Today’s Cut Adds To It
Recent housing data has shown clear signs of recovery even before today’s OCR decision:
Sales volumes have risen in 27 of the past 29 months (Cotality).
National house values are essentially flat year on year (down just 0.2%).
First home buyers have lifted their share to 28%, up from 21% during the tightest part of the rate hike period.
Investors represent 35% of buyers with 24% mortgage based and 11% cash based.
Upgraders have risen from 23% to around 25%
These shifts matter because volumes rise before prices in every recovery phase.
Today’s OCR cut reinforces and accelerates these underlying drivers.
Affordability Continues To Improve Meaningfully
The Staircase Affordability Index (SAI) shows that serviceability has improved faster in the past 12 months than at any time since 2011.
Repayments are down significantly from 2023-2024 levels
Serviceability has improved by more than 20 percent
Lower rates today will improve affordability even further in the coming months
For many households, this is the first time since 2021 that buying feels genuinely achievable again.
Auckland: Improving Demand Despite Elevated Listings
Auckland deserves careful differentiation.
Listing levels remain above historical norms.
However, the important trend is this:
Turnover is increasing while stock is slowly being absorbed.
What this means in practice:
Buyers have more choice than in other regions
Well located, quality stock is selling faster
The excess stock is gradually clearing as confidence returns
Once the overhang reduces, competition will naturally build
Auckland often turns earlier than other regions in recovery phases.
The OCR cut will help accelerate the absorption of existing inventory.
Queenstown and Tauranga Continue To Show Strength
Queenstown and parts of Tauranga continue to experience tighter supply dynamics:
Queenstown’s population and jobs growth remain strong
New housing pipeline limitations persist
Demand from both lifestyle purchasers and investors is rising
Prices have held up more strongly than most regions
Today’s rate cut will support these higher growth regions by widening the buyer pool and improving serviceability.
A Realistic Outlook
Our view is measured and grounded:
The recovery is underway, but still in its early phase
Sales volumes will continue improving first
Price growth will likely remain modest near term, strengthening as confidence and turnover build
Affordability improvements will be the main driver of renewed activity
Upgraders re-entering the market will become one of the biggest contributors to rising sales over the next 12–18 months
This is a healthy, sustainable recovery.
Why Today’s Cut Is Especially Important for Upgraders
Upgraders have been missing from the market for several years due to:
Job insecurity
High rates
Weaker confidence
Reluctance to take on higher debt
Their share normally sits around 30 percent. With affordability significantly better and rates falling again, this group is poised to re-engage.
Upgraders are crucial because:
They transact at higher price points
They are less price sensitive
They create both demand and supply
Their return often marks the true start of a sustained recovery
Today’s OCR cut materially accelerates their return.
The Staircase View
With the OCR now at 2.25 percent, the conditions driving recovery are strengthening:
Borrowing power is increasing
Mortgage pricing will drift lower
Confidence is improving
First home buyers are returning
Investors are steadily re-engaging
Upgraders will follow as job confidence firms
Listings in Auckland will gradually be absorbed
Regional bright spots like Queenstown and Tauranga will outperform
This is a broadening recovery, not a speculative one.
What Buyers and Investors Should Do Now
The most strategic move now is to position early:
Review borrowing power under lower test rates
Update pre-approvals before competition intensifies
Consider refinancing to reduce repayments
Analyse opportunities in Auckland while stock is plentiful
Explore growth supported regions like Tauranga and Queenstown
Build a strategy now rather than chasing the market later
Call Staircase on (09) 966 5560 or visit staircase.co.nz for a complimentary mortgage and investment strategy session.
In Summary
This OCR cut confirms the Reserve Bank’s commitment to supporting New Zealand’s economic recovery and easing financial pressure on households.
The property market is warming, sentiment is improving, and affordability is improving.
For many buyers and investors, this is the most favourable environment in several years.
The next phase of the recovery has begun. Step up with Staircase.
