Rate cut impact: How much will house prices rise this year?

1. OCR cut won't have a huge impact on prices

The Reserve Bank duly lowered the Official Cash Rate by 25 basis points to 3.25% last week, with inflation still inside the 1-3% target band and the economy subdued. The central bank also believes global trade tensions will have a downward influence on GDP growth and inflation over the medium term, hence the indication of perhaps two more OCR cuts by the end of 2025/ early 2026. This implies a slower pace of cutting than we’ve seen to date, especially since the committee also took a vote on whether to cut or hold – and one member voted to hold.

For the housing market, not a lot changes. The biggest falls in mortgage rates are now likely behind us, and the prospect of a subdued upturn in 2025 remains on track, with the Reserve Bank (using the Cotality Home Value Index) predicting house prices will rise 3.5% this year.

2. First-home buyers are getting older

The first Cotality-Westpac First Home Buyer Report, released last week, offered up a wide range of new insights. The average age of first-home buyers nationally has risen from 34 in 2019 to 36 in 2025 (and 37 in Auckland). Some buyers will have made a conscious decision to delay entry to the property market for a variety of reasons, including career goals or travel overseas. But for others, the rising age signals affordability challenges, and the longer period required to save a deposit and meet other lending criteria, including serviceability tests.

The good news for first-home buyers, however, is that their share of the market remains high, at 25% of property purchases over the first four months of 2025, with the number of deals also rising. They’re also getting more for less, in the sense that prices are lower and many buyers are opting for standalone dwellings. The security of tenure provided by home-ownership remains a key motivation for buyers, with access to KiwiSaver and tapping into the low deposit lending allowances at the banks important supports.

Cotality chief economist Kelvin Davidson: "The biggest falls in mortgage rates are now likely behind us." Photo / Peter Meecham

3. Effects of lower mortgage rates are becoming clearer

Speaking of the low deposit lending allowances (or LVR speed limits), the latest Reserve Bank mortgage figures showed that for nearly 14% of owner-occupier loans in April, the buyers had a deposit of less than 20%, the highest figure in more than four years. Meanwhile, although still fairly low, the share of lending being done at a high debt-to-income ratio also increased, for both investors and first-home buyers. You’d have to infer from these results that the falls in mortgage rates over the past 9-12 months are now starting to flow through more noticeably to activity on the ground.

4. Dwelling consents still ticking along

There were a touch more than 2400 new dwellings consented in April, down by 17% from the same month in 2024 – but keep in mind that this April was loaded with holidays, and of course, consents were up by 16% in March. As such, my overall take on the numbers is that, yes, consents have fallen a long way from the peak, but looking through some of the recent monthly volatility, the floor still seems to have arrived – at an annual running total of 33,000-34,000, well above past troughs.

5. Longer fixes more popular again?

This week, look out for the Reserve Bank's mortgage data for April split by the loan terms chosen. With uncertainty still dominating the local and global economies, and the banks now offering some attractive longer-term rates, more new borrowers are choosing to fix their loans for longer than 12 months. The share was 34% in March, the highest since 36% in January 2024, and it seems likely there’ll be more of the same in April (although there’s still some dabbling in floating rates too).

- Kelvin Davidson is chief economist at property insights firm Cotality