Rate cuts continue
- The Reserve Bank of New Zealand - Te PÅ«tea Matua (RBNZ) continues to relax monetary policy settings by lowering the official cash rate. In August, the official cash rate (OCR) was reduced by 25 basis points to 3%. Most importantly, the RBNZ signalled more cuts to come. Our economics team expect the cash rate to be fall below 3%.
- This continues the OCR reductions that began in the last half of last year. These cuts aim to support the economy, boost confidence, and stimulate growth in the housing market.
Our 2025 housing market forecast
- The Aotearoa New Zealand housing market is still struggling. House prices have tracked sideways since May 2023, following an 18% peak-to-trough price decline.
- Our Chief Economist Jarrod Kerr forecasts that the RBNZ will lower the cash rate below 3% by the end of 2025. "Interest rates are the largest driver of house prices. Falling interest rates will support the market and we expect steady gains in house prices from here," he says.
- However, we still have a chronic shortage of housing in Aotearoa. We need to entice investors back so that developers will follow. Recent changes to housing policy should bring them back
- When debt-to-income (DTI) restrictions came into effect on 1 July 2024 loan-to-value ratios (LVR) relaxed. They are complementary. DTI restrictions are unlikely to have a meaningful impact as they're introduced, although some borrowers may find it harder to get the loan size they need.
- And as investors no longer need to worry as much about the Brightline test or interest deductibility, we should see investors return to the market. Read more about the Brightline test and investing in property.
- Alongside further interest rate reductions and tweaks to investor property policy, we expect the housing market to bounce back in 2025 with house prices increasing 2–3% over the year.
For more detailed economic insight and commentary from our Economists, see our Economic Insights Hub.
Interest rates are the largest driver of house prices. Falling interest rates will support the market and we expect steady gains in house prices from here.Jarrod Kerr, Kiwibank Chief Economist
What it could mean for you
Jarrod and Mary Jo offer their Insights on what their housing market forecast could mean for Kiwi at different stages of their house-buying journeys.
If you're saving up your deposit
Time it right for you
No matter what the market is doing, it’s less about the right time in the market and more about the right time for you. "The right time to enter the market is when you’ve got your deposit," says Jarrod. "In the meantime, keep your head down, keep saving and stay focused on your goal."
If you're buying your first home this year
Do your research
Confessed finance nerds Mary Jo and Jarrod love a good research session, and they strongly recommend that you do your research, too. Investing time and effort into understanding your options will pay off in the long run. “Buying a house is the largest purchase most people will make, so it's important to get out there and look at different areas to see what you can afford," Mary Jo says.
Budget using current rates
Despite the forecasted potential rate decrease, Mary Jo suggests that Kiwi play it cautiously and base their repayment budget on current rates. “Keep any rate cuts in the back of your mind, but don't base your budget around them,' she says. "That way, any future cuts can be a pleasant bonus later in the year."
If you already have a home loan
Split it up
Splitting up your mortgage into different, staggered fixed-term durations can offer you flexibility. "Consider a mix of fixed-term durations including 6 months, 1 year, 2 years and 5 years," he says. See our different fixed-term options.
Jarrod explains that the idea is to always have a portion of the mortgage rolling off so that your fixed terms don't all expire at the same time. This approach helps to avoid the risk of having to refix all your loans on whatever market rates are at the time, and it could allow you to take advantage of lower rates that could be in the market.
Pay it off faster
If you can build up some savings, then another benefit of splitting your mortgage into different fixed-term durations is the opportunity to pay off your mortgage more quickly. Once a fixed term comes to an end, you have the option to pay down more on that portion of your mortgage using your savings lump sum.
More economic insights to keep you in the know
Stay up-to-date with the latest and unique insights into the New Zealand economy from our team of economists.
Start your home buying journey
Talk to a specialist
Our home loan specialists can walk you through the process of buying a home and discuss what your options are.
Find a specialistTry our calculators
Looking to fine tune the structure of your home loan or work out how much you might be able could borrow? Use our calculators to compare your options.
Calculate nowGet first home buyer tips in your inbox
Be at the top of your home buying journey with tips, offers, support and helpful information from our experts delivered straight to your email inbox.
Sign up for the newsletterThis page provides general information and isn't intended as regulated financial advice. To review your specific situation and financial requirements please talk to one of our Kiwibank Representatives or your Financial Adviser.