House price rally could reduce odds of OCR cut: Westpac

Tuesday 15 October 2019

A pickup in the housing market could give the Reserve Bank "pause for thought" over further official cash rate cuts, according to Westpac economists.

The latest Real Estate Institute of New Zealand data, which showed a 6.6% increase year on year in September, could prompt the RBNZ to rethink further aggressive OCR cuts, Westpac chief economist Dominick Stephens told TMM Online

Stephens believes the expected November cut – fully priced in by swap markets – is "not a done deal", and the central bank could be swayed if inflation data turns out better than expected. He says markets have "overdone" their estimates for a November rate cut.

He added: "I'd say the odds were closer to 60% [in favour of a cut]. The balance is probably in favour of a cut, but our view is there will not be another one in 2020 because of further growth in the housing market."

In the bank's weekly comment on the housing sector, Westpac economists said REINZ data would undoubtedly make the central bank "sit up and take notice".

The report said a strong housing market might also slow down the loosening of LVR speed limits: "It is unlikely that the RBNZ’s policy of loosening the LVR restrictions will be eliminated, but a stronger housing market might slow the pace of loosening."

Comments from our readers

No comments yet

Sign In / Register to add your comment

Property News

Why house price growth will continue

House price inflation is unlikely to radically slow this year after a strong end to 2019, according to leading economist Tony Alexander.

House Prices

A decade of property price growth

Recent years have seen some spectacular house price growth around New Zealand but just how much have asking prices gone up in different markets over the last 10 years?

Commercial

Looking outside the box

The property market is heating up again – and that means more competition for good deals – but there are still options out there for keen property investors.

Mortgages

Putting the RBNZ's new capital rules into perspective

There's been a lot written about the Reserve Bank's new capital rules for banks and some of it seems to miss the mark. Here's Tarawera Publishing managing director, Philip Macalister's, take after hearing from the governor yesterday.

Site by PHP Developer