OCR Hike Triggers Mixed Reactions from Economists as Housing Market Sentiment Remains Cautious

The Reserve Bank of New Zealand (RBNZ) raised the official cash rate (OCR) to 2.75%, but economists and agents are split on what comes next for mortgage rates and the housing market.

Independent economist Tony Alexander notes that fixed wholesale borrowing costs have already priced in the hike, leaving little immediate pressure for fixed mortgage rates to adjust. However, he expects further increases through 2026 and into 2027 due to inflation pressures.

Westpac chief economist Kelly Eckhold described the RBNZ's move as 'appropriately balanced', with a forecast of a hold in October and another hike in December. ASB senior economist Mark Smith went further, saying the RBNZ is normalizing policy at a gradual pace.

The OCR may rise to 3.25% by year-end, depending on bank forecasts, which vary from Westpac's single further hike to ASB's expectation of two more moves. Meanwhile, buyer sentiment remains cautious but not stalled, with LJ Hooker data showing a decline in property sales and values.