News & Research

One year of OCR increases, with more to come

The Reserve Bank of NZ delivered another widely anticipated 0.5% increase in the official cash rate (OCR) today, taking it to 3.5% – the highest level since June 2015 when they lowered it from 3.5% to 3.25%.

The latest meeting also marked the one year anniversary of the first OCR increase in this cycle, when it was lifted from the emergency lows of 0.25% to 0.5% back in October last year.

Today’s [October 5, 2022] decision itself was no surprise, but it was nevertheless interesting to see that the committee considered the case for a 0.75% rise – and they also reiterated that monetary conditions still need to tighten ‘at pace’. In terms of mortgage rate implications, then, floating loans may see increases over the next day or two, but there might not necessarily be much change in fixed rates as a direct result of this increase. Even so, the past few weeks have been a timely reminder that global uncertainty and the inflation outlook are far from settled – meaning that mortgage rates may not have peaked yet, especially if the Reserve Bank needs to keep the OCR rising beyond 4% next year.

From a borrower’s perspective, clearly the increases in mortgage rates over the past year or so have produced considerable challenges, let alone any further rises in the coming period. However, it’s also worth pointing out that there may be less to fear around the ‘refinancing wave’ than was previously thought. Indeed, back in June last year, 66% of existing mortgages were fixed but due to reprice within a 12-month period. But as time has passed and those debt maturities have been worked through – with low unemployment helping households adjust to the ‘new norm’ for their repayments without widespread problems – we now have 44% of debt fixed and due to reprice over the next year. That’s the lowest share since March 2018 and, if anything, below ‘normal’.

Looking ahead, the next release of the consumers price index on 18th October shapes up as a huge marker. If the inflation rate has slowed, this might just start to sway a view that the OCR will peak at 4% in this cycle (perhaps November). But further signs of strong inflationary pressures would likely lead to an OCR peak above 4%, with rises continuing into next year – that view would certainly be emphasised by the ‘hawkish’ tone of today’s statement.

What this all means for the property market is that the falls in home values aren’t about to come to a sudden halt. But at the same time, there are some signs that certain buyer groups – e.g. first home buyers – are becoming a little more comfortable to return to the market, perhaps aware they won’t necessarily be able to buy perfectly at the floor but that the falls already seen are ‘good enough’ for them. A bit of extra demand, in turn, sets the scene for property values to potentially stop falling in the first half of next year, provided that unemployment stays low.


Kelvin Davidson

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

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