OCR on Hold at 2.75%: What It Means If You're Buying a New Home

If you're planning a move into a brand-new home, you've probably had one eye on interest rates all year. This week brought a surprise: the Reserve Bank held the Official Cash Rate (OCR) at 2.75%, when almost everyone expected it to rise to 3%.

Here's what happened, and what it means if you're buying new.

The short version

On Wednesday, the Reserve Bank's Monetary Policy Committee voted 4–3 to keep the OCR where it is. Rates had already gone up in July and September, and the Bank wants to see how those increases settle before doing more. Inflation also came in a little lower than expected.

The Bank was clear this is a pause, not a change of direction. It still thinks rates are likely to rise again, and its next decision is on 9 December.

What it means for your mortgage

If you're on floating: nothing changes this time. Floating rates at the main banks are sitting around 6.3%.

If you're fixing soon: you may see a little relief on shorter terms. Wholesale rates dropped after the announcement, which could ease six-month and one-year rates. As of Wednesday, the lowest advertised one-year special was 4.95%, and two-year specials were around 5.3% to 5.4%.

Looking ahead: most economists still expect rates to edge up over the next year. A mortgage adviser can help you work out which mix of terms suits you.

Why new build buyers are in a different position

Buying new comes with a few advantages that matter more when rates are on the move.

• Deposit rules work in your favour. New builds are generally exempt from the Reserve Bank's loan-to-value limits, so some lenders may accept a smaller deposit than they would for an existing home.
• Borrowing caps are more flexible. New builds are also generally exempt from the debt-to-income caps that limit how much you can borrow against your income. Your bank's own lending criteria still apply.
• Lower running costs. A brand-new, warm, dry, energy-efficient home means fewer surprise repair bills and lower power costs, which matters when your mortgage is a bigger share of the budget.

Buying off the plans? Timing matters

If you're buying off the plans or building a house-and-land package, your interest rate is usually set when you settle, not when you sign. That could be months away.

So it's worth keeping your pre-approval current and checking in with your adviser as settlement gets closer. A rate that's moved by the time you get the keys shouldn't come as a surprise.

Choose the home, not the headline

Rates will rise and fall many times while you live in your home. The location, the school zone, the commute, and the space for how your family lives will matter long after this week's announcement is forgotten.

That's where we can help. Whether you're looking in Auckland, Christchurch or Northland get in touch to see what's available now.

This article is general information only and is not financial or lending advice. Please talk to a qualified mortgage adviser or your bank about your personal circumstances.

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