The Reserve Bank (RBNZ) has decided to leave the official cash rate (OCR) on hold at 1.5%, but also dropped a pretty heavy hint of another cut in the coming months. Although this may not pass through to mortgage rates, it’s still a great time to be a borrower.

CoreLogic Senior Property Economist Kelvin Davidson comments:

Today’s decision to leave the OCR on hold at 1.5% was pretty much a fait accompli, given the tendency to only change it when the formal Monetary Policy Statement (MPS) rolls around every 12 weeks, as well as the fact that the previous cut was only made six weeks ago – the Committee will be wanting time to assess how that cut is affecting the economy (and housing market) before moving again.

However, the statement noted that due to a softer outlook for economic growth (offshore and domestic) “a lower OCR may be needed over time to continue to meet our objectives”. Moreover, according to the summary of the Committee’s discussion, a cut at today’s meeting was actually considered. It would appear from this that the timing for the next rate cut could well be as soon as August 7th.

So how will all of this play out in the housing market? On balance, we wouldn’t anticipate a huge boost to either sales activity or property values from any further OCR cuts. After all, mortgage interest rates are already low, and no doubt banks are already starting to prepare for the prospect that from November they’ll be required to start holding more capital on their balance sheets. Not pushing a full OCR cut through to lending rates is clearly one way to start doing this.

However, even if mortgage rates don’t fall much further from here, let’s not forget that they’re already very low. And that should help to underpin housing market activity and prices for a while yet, especially when combined with a low unemployment rate and still-growing (albeit slowing) economy.

As we covered off in a Pulse last week, the outlook for the property market remains sure and steady. Indeed, we’ll get more insight on this when the latest mortgage lending figures are released (tomorrow at 3pm; our note to follow soon after) and from the QV House Price Index for June, due next Tuesday (2nd July). It’s likely to show strengthening values at the NZ-level (albeit continued softness in Auckland).