Reserve Bank maintains OCR at 2.5 per cent

The Reserve Bank of New Zealand (RBNZ) has stuck to its guns and kept the official cash rate (OCR) at 2.5 per cent at it's January 28 meeting.

The OCR, which the RBNZ uses to control a variety of factors including inflation and mortgage lending rates by smaller banks, has been kept at this level due to "uncertainty about the strength of the global economy", according to an RBNZ press release.

However, it also indicated a potential "policy easing" over the coming year, should inflation become an issue to manage.

In terms of the property market, RBNZ cautioned that Auckland housing may be starting to moderate, but that it was "too early to tell", meanwhile "house price pressures have been building in some other regions".

Previous cuts to the OCR in December 2015 have resulted in decreased variable interest rate mortgage repayments, as banks reduced their own rates to match the Reserve Banks. Lower rates make mortgages far more appealing to new investors and first-home buyers, but also increase the average amount of debt per person in New Zealand as more people take on financial commitments. This makes maintenance of the OCR a balancing act for the RBNZ, with a great deal of research from a number of areas.

Green Finance Spokesperson Julie-Anne Genter described that the Auckland housing market was one of the major factors that affected the current OCR decision, explaining that more housing was needed to relieve the rising prices that pushed residential property investment out of the reach of many Kiwis.

"We need Government-backed affordable housing developments, quality intensification along key transport routes, and a capital gains tax (excluding the family home)," she said to interest.co.nz.

The next meeting to discuss the OCR is taking place on 10 March.

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Daniel Carney
Authorised Financial Adviser / Investment Property Expert

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